Credit Default Swaps: The Vanilla Essence
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Restructuring and redenomination
Restructuring and redenomination
Foreword
Preface
A credit default swap snapshot
Parties and key players
Documentation and standard trading conventions
Credit risk period, scheduled termination date and termination date
Fixed amounts, floating rate payer calculation amount and initial payment amount
Qualifying guarantee and qualifying affiliate guarantee
Reference obligation
Subordination and the senior non-preferred supplement
Outstanding principal balance and due and payable amount
Obligations and deliverable obligations
Credit event overview
Bankruptcy
Failure to pay
Repudiation/moratorium
Restructuring and redenomination
Governmental intervention and contingent convertible capital instruments
Successor determinations
Publicly available information and eligible information
Notices
Business day terms and timing rules
Event determination date and settlement methods
Auction settlement
Cash settlement
Physical settlement
Physical settlement fallback procedures
Orphaning
Fixed recovery transaction and reference obligation only trade
Novation and early termination
Economic sanctions: compliance challenges
Disclosures and regulations
Conclusion: at the ‘Exit Checkpoint’
Appendix
References
15.1 INTRODUCTION
This chapter concentrates on restructuring as a credit event, which can be traded on the basis of “no restructuring”, “full restructuring” or “M(M)R Restructuring” (where either modified restructuring (“Mod R”) or modified modified restructuring (“Mod Mod R”) is applicable to a transaction). As discussed in Chapter 10 (on Obligations and deliverable obligations), where an “M(M)R Restructuring” applies, there are additional constraints relating to deliverable obligations, namely maturity limitations and the types of obligations that can constitute a Deliverable Obligation. This chapter begins with a brief overview of the key foundational and interpretive principles relating to a restructuring. Each of the conditions that must be satisfied for a restructuring to occur are then examined, and for this a synthesis of the events that occurred with respect to one of the largest sovereign restructuring in relation to the Hellenic Republic is provided. The chapter concludes with the conditions that must be satisfied for a redenomination restructuring to occur and, in the redenomination section, an evaluation of the status of a redenominated obligation as an Obligation
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