Markit and Creditex, in partnership with major credit derivative dealers, today announced the results of Credit Event Auctions conducted to facilitate settlement of credit derivative trades referencing Nortel Networks Corporation and Nortel Networks Limited, a whollyowned principal operating subsidiary of Nortel Networks Corporation.
At 3:00 pm ET today, final prices for the purpose of settling credit derivative transactions were determined as follows:
Credit Event Auction Final Price
Nortel Networks Corporation 12%
Nortel Networks Limited 6.5%
The final price represents the recovery rate used to cash settle credit derivative trades subject to the International Swaps and Derivatives Association 2009 Nortel Entities CDS Protocol. Protection sellers compensate protection buyers for the loss on the defaulted obligations by making a payment equal to par value minus the recovery rate.
Markit and Creditex are the official administrators of Credit Event Auctions, which enable market participants to cash settle credit derivative transactions. During a Credit Event Auction, dealers submit orders electronically on the Creditex platform. The auction submissions are delivered to Markit electronically. Markit calculates and verifies the results, and publishes them on www.creditfixings.com.
The Credit Event Auction process was launched in 2005 by Markit and Creditex in collaboration with the International Swaps and Derivatives Association and major credit derivative dealers. Since then, Creditex and Markit have conducted 39 Credit Event Auctions, including today’s Nortel auctions, and the process has become an integral part of the CDS market’s infrastructure.