TriOptima tears up $720 billion of Delphi-related CDS

Stockholm-based TriOptima has executed a further credit default swap (CDS) termination cycle, tearing up more than $720 billion contracts involving the troubled Michigan-based auto-parts maker, Delphi.

In the wake of Delphi’s filing for Chapter 11 bankruptcy protection on October 8, 21 dealers used the firm’s multilateral tear-up technology to terminate some 5,300 single-name Delphi CDS contracts with a notional value of $23 billion – approximately 70% of all outstanding Delphi single-name contracts – on October 12 and 19. Before bankruptcy, only about 500 Delphi CDS contracts had been terminated in regular tear-up cycles.

The Swedish firm also scheduled a special index termination cycle for October 20, having completed a regular index termination cycle on October 7. A total of 17,344 Delphi-affected index swaps with a notional value of almost $700 billion was torn up.

TriOptima’s tear-up technology allows swaps counterparties to multilaterally eliminate unnecessary trades from their books while allowing them to maintain the same net position in regular termination cycles. But targeting contracts where there has been a credit event also allows participants to eliminate many of the legal and administrative burdens involved in the settlement of a defaulted name.

Since the beginning of the year, TriOptima has terminated over 100,000 CDS contracts with a notional value of $2.3 trillion.