Unwanted orphans

In The City

The debate about bond covenants and the rights of bondholders has taken another turn in the last few weeks. Credit markets, particularly in Europe, have been moved by a relatively new and confusing legal risk: the prospect of a credit swap contract being 'orphaned'. The subject is long and complex; suffice to say here that a credit swap is orphaned if the reference entity of the swap has no debt. This can happen for any number of reasons: to name but two, the company might buy back all its d

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