The International Swaps and Derivatives Association, Inc. (ISDA) today announced that LCDX dealers voted to hold an auction for loan-only CDS transactions referencing Aleris International, Inc., which announced on February 12 that it filed petitions for voluntary reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court in Delaware.
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 LCDX dealers according to the LCDS Auction Rules published on ISDA’s website.
The auction terms will set out a settlement mechanism similar to that used to settle recent credit events including Tribune, Lyondell and Smurfit-Stone. Since the auction mechanism is already built into ISDA’s standard loan-only CDS documentation, no protocol is required. The auction will be administered by Markit and Creditex.