Creditflux Newsletter

Bond exchanges carried out by companies referenced in synthetic CDOs have been positive for the performance of these vehicles, according to Moody’s. In its latest Structured Credit Perspectives newsletter, the rating agency says that what it defines as “distressed exchanges” typically help an issuer to avoid more severe actions that would trigger credit events in CSOs. An exception is the distressed exchange by AIB, which led directly to a credit event. In another case, CIT Group carried out a distressed exchange in August 2009, and went on to file for bankruptcy three months later.

The biggest reference entities in Moody’s-rated CSOs that have carried out distressed debt exchanges but avoided triggering a credit event are Ally Financial (the former GMAC, in December 2008), Residential Capital (in April 2008), Clear Channel (in August 2009), Beazer Homes (in June 2009) and Harrah’s (in December 2008).