NEW YORK (HedgeWorld.com)–The International Swaps and Derivatives Association announced the publication of a protocol created to facilitate settlement of credit derivatives trades involving Dana Corp., the Toledo, Ohio-based auto parts supply company that filed for bankruptcy March 3.
Dana is involved in various credit derivative indexes, including those published by Dow Jones CDX and TRAC-X.
ISDA’s protocol gives market participants a way to settle trades based on such indexes, by amending the documentation for such trades from physical to cash settlement and participating in an auction to determine the final price for certain Dana bonds.
Markit and Creditex will administer the auction, scheduled for March 31, which will be open to ISDA members and non-members alike. Single-name trades won’t be part of the process, and so remain subject to the physical settlement procedures in those trades’ governing documentation.
The reference obligations may be any one of the following 13 Dana bond issues:
The protocol provides that all bids and offers at the auction shall be stated as a percentage of the outstanding principal balance, rather than the face amount, of the deliverable obligations.