NEW YORK (HedgeWorld.com)–The International Swaps and Derivatives Association announced a new protocol designed to facilitate settlement of credit derivative trades involving Calpine Corp.
Calpine, a power producer that filed for bankruptcy last month, is included in various credit derivative indexes, including those published by Dow Jones CDX and TRAC-X.
The 2006 Calpine CDS Protocol will enable institutions to amend their documentation for such index trades from physical to cash settlement and to participate in an auction, scheduled for Jan. 17, to be administered by Creditex and Markit, which will determine the final price for certain Calpine bonds.
“The Protocol mechanism continues to be the most effective and efficient solution for settling high-volume credit derivative index trades,” said Robert Pickel, chief executive and executive director, ISDA, in a statement.
In contrast to other recent ISDA protocols, there is no adherence fee associated with the submission of adherence letters in connection with the 2006 Calpine CDS protocol, either for ISDA members or for non-members. The adherence period is from Jan. 9 to Jan. 12.
ISDA said that single name trades aren’t part of the auction process, but that adherents agree that:
?? 1/2 The 6% contingent convertible notes due 2014 are deemed to be deliverable obligations for single name trades, and
?? 1/2 The 7.75% contingent convertible notes due 2015 will not be deemed to be deliverable obligations for single name trades.
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