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shedfish

Bradford And Bingley

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..a secure home for your monkey

at Bradford

and Bingley...?

July 9 (Bloomberg) -- Bradford & Bingley Plc’s failure to pay interest on some of its subordinated bonds is a credit event, the International Swaps and Derivatives Association said.

The ruling will trigger credit-default swaps linked to the Bingley, England-based company. The contracts cover about $416.5 million of the nationalized mortgage lender’s debt, according to data from Depository Trust & Clearing Corp., which runs a central registry that captures most trading. The contracts will be settled in an auction.

http://www.bloomberg.com/apps/news?pid=206...id=aFCV9q6I.2ho

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CDS can be written on any part of the debt structure so yes, failure to pay on a subordinated bond constitutes a credit event. I cannot agree with the premise of there being a central registry which captures all or "most" of the trades, this is a pure OTC with no central clearing so it's pretty impossible to get an accurate number of the value of the notionals traded. This is all changing as we speak, market participants are being forced to confirm on a platform called Markitwire (previously knowns as swapswire) which will make the true volumes being traded transparent to the regulators.

The big question in our industry at the moment is this just phase 1 of 2? Phase 2 being all OTC derivatives having to be cleared through a single global central clearer. This will decimate the inter-dealer brokers as well as destroy the trading monopolies the banks currently enjoys. Why if you are a hedge fund for example would you trade through a bank / prime broker when you can transact on an exchange directly with your counter-party cutting out the middle-men banks and brokers?

I suspect though the vested interests here are so huge and as we have seen that govt is in the pockets of the bankers that a very much watered down version of this will eventually occur.

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Who, Whom?

(So as not to fall into Noel's monosyllabic world...)

LINK to 28th May 2009 thread.

And some content:

CDS will (generally) reference the underlying BONDS (or other obligations) that would need to default to it to be a trigger event.

Failure to pay interest on subordinate debt just won't be a trigger event for the senior CDS.

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Who, Whom?

(So as not to fall into Noel's monosyllabic world...)

LINK to 28th May 2009 thread.

And some content:

daedulus needs to give us 10 press ups (although I had a chat with one of our senior traders when this happened as people on FT were debating the same thing)

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daedulus needs to give us 10 press ups (although I had a chat with one of our senior traders when this happened as people on FT were debating the same thing)

Well, B&B has a LOT more than $414m of senior debt, so, as predicted, this is simply saying that the non-payment is a credit event for CDS which reference the SUBORDINATED debt of B&B.

This is NOT a credit event for CDS referencing B&B Senior Debt.

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How can HMG just decide to let B&B not pay its debt interest? What's the legal basis for this? If it's allowed not to pay subordinate debt why not just ignore the senior debt as well? At what point can creditors take recovery action in the courts?

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Well, B&B has a LOT more than $414m of senior debt, so, as predicted, this is simply saying that the non-payment is a credit event for CDS which reference the SUBORDINATED debt of B&B.

This is NOT a credit event for CDS referencing B&B Senior Debt.

"This is NOT a credit event for CDS referencing B&B Senior Debt."

Unless I am misunderstanding something obvious in what you are saying, I am going to have to disagree. Recovery locks are being quoted for both senior and sub curves - I have spoken to a few people and everyone thinks senior has triggered.

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"This is NOT a credit event for CDS referencing B&B Senior Debt."

Unless I am misunderstanding something obvious in what you are saying, I am going to have to disagree. Recovery locks are being quoted for both senior and sub curves - I have spoken to a few people and everyone thinks senior has triggered.

Any serious implications if it has Noel?

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