Barcap calls succession event on Cable & Wireless

Barclays Capital says in a report published on Friday that a recent announcement by UK media company Cable & Wireless creates a potential succession event on the company’s credit default swaps. The company is splitting itself into two new companies, C&W International and C&W Worldwide.

Barclays Capital analysts say the two new entities do not appear to be guaranteed by the original entity which is referenced in credit default swaps, Cable & Wireless plc. Therefore, the demerger, announced on 5 November, counts as a succession event under the Isda documentation.

The report says that 36% of Cable & Wireless’s £900 million ($1.5 billion) of debts will go to C&W Worldwide, and the rest to C&W International. That would mean that each credit default swap contract would split into two new contracts of equal size referencing each of the two successors.