During the week of June 8, 2009, Markit and Creditex conducted Credit Event Auctions (CEAs) to facilitate settlement of credit derivative trades referencing five global companies, including General Motors. The auctions have been used to settle transactions in connection with the defaults of 38 companies so far this year in the U.S. and Europe and are an integral part of efforts by International Swaps and Derivatives Association (ISDA) to standardize critical elements of the credit default swap (CDS) market through the "Big Bang Protocol," which came into force on April 8, 2009.
For General Motors, separate auctions were run to settle credit derivative contracts referencing both bond obligations (CDS) and loan obligations (LCDS). To facilitate physical settlement, nearly $1 billion of General Motors bonds were traded in the CDS auction and just over $100 million of General Motors loans traded in the LCDS auction. The final prices determined by the auctions were used by market participants who opted to cash-settle their contracts according to the ISDA Protocol.
Listed below are the results from each CDS and LCDS auction conducted during the past week:
Company Name Auction Date Auction Type Region Settlement (%)
------------ ------------ ------------ ------ --------------
HLI Operating
Company 9 June LCDS US 9.5
JSC BTA Bank 10 June CDS Europe 10.25
Georgia Gulf 10 June LCDS US 83
R.H.
Donnelley Corp. 11 June CDS US 4.875
General Motors
Corporation 12 June CDS, LCDS US 12.5, 97.5
CEAs are a transparent, efficient means of determining final recovery rates for the purpose of settling credit derivative transactions. The CEA process was launched in 2005 by Markit and Creditex in collaboration with ISDA and major credit derivative dealers. Since then, Markit and Creditex have conducted over 64 CEAs, including auctions for credit events such as Lehman Brothers, Fannie Mae, Freddie Mac and Washington Mutual. The CEA process is transparent, open to all market participants and allows for either cash or physical settlement. The process has become an integral part of the CDS market infrastructure that continues to evolve in response to market events, regulatory requirements and industry standardization.
For CEA schedules and results, please see www.creditfixings.com.
