The International Swaps and Derivatives Association, Inc. (ISDA) has announced that it will launch a CDS auction protocol to facilitate the settlement of European loan-only credit default swap (ELCDS) trades referencing certain loan obligations of British Vita (UK) Limited, the chemicals company. This will be the second European leveraged loan credit event auction, following the announcement that an auction will be held for Sanitec.
ELCDS transactions refer to Reference Obligations rather than Reference Entities as is the case in regular CDS and North American LCDS. In accordance with the ELCDS Auction Rules, published on ISDA’s website, the Markit iTraxx LevX Market Makers have determined that the Reference Entities (which term includes British Vita (UK) Limited, which was formerly known as TPG Spring (UK) Limited, together with all other borrowers and obligors in relation to the Reference Obligations) has failed to make payments due on some or all of the Reference Obligations (also listed on the Markit Database) and have voted to hold an auction for ELCDS transactions referencing any of those Reference Obligations.
ISDA will facilitate the process by publishing the auction terms on its website www.isda.org, in due course. The auction terms, including the auction date, will be determined by the Markit iTraxx LevX Market Makers dealers according to the ELCDS Auction Rules. ISDA will also publish a protocol to update legacy trades (ie those single name trades based on previously published ISDA documentation and LevX Series 2 trades) and certain other single name and LevX Series 1 trades on Sanitec and British Vita only, which will be open to ISDA members and non-members alike. The auction will be administered by Markit and Creditex.
