Isda committee calls Thomson a restructuring credit event

The International Swaps and Derivatives Association yesterday announced that its EMEA credit derivatives determinations committee resolved that a restructuring credit event occurred in respect of Thomson, a Paris-headquartered company that provides a range of communications products and services.

The Thomson restructuring is the first restructuring credit event that will be settled under the terms of the restructuring supplement, published by Isda on 27 July and implemented via the 'Small Bang Protocol'. The committee determined yesterday that one or more auctions may be held in respect of outstanding credit default swap transactions of varying maturity 'buckets'.

Isda says it will publish the initial list of deliverable obligations for each maturity bucket on its website, www.isda.org/credit, in due course.

Latest European research from JP Morgan examines the implications of the credit event. Analysts note that not all CDS investors need to trigger their CDS contract,s as a restructuring credit event allows the right but not the obligation to exercise. In order to trigger, an investor needs to send a credit event notice. Market participants are still looking to determine whether there is evidence of a failure-to-pay credit event on the restructured notes. Once the auctions have taken place however, the option to exercise the contracts on this restructuring event will end.

For the iTraxx indices, Thomson was in iTraxx Europe S1 to S7, Hivol S4 to S7 and Crossover S8 to S11. These indices will split into two separate trades – an index ex-Thomson and a single name Thomson CDS contract that can then be exercised or not.