Creditex and Markit, in partnership with major credit derivative dealers, today announced the results of Credit Event Auctions conducted to facilitate settlement of credit default swap (CDS) and loan-only credit default swap (LCDS) trades referencing Smurfit-Stone Container Enterprises, Inc.
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
Smurfit-Stone Container CDS 8.875%
Smurfit-Stone Container LCDS 65.375%
The final price represents the recovery rate used to cash settle credit derivative trades. Protection sellers compensate protection buyers for the loss on defaulted obligations by making a payment equal to par value minus the recovery rate.
Creditex and Markit are the official administrators of Credit Event Auctions. 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 Creditex and Markit in collaboration with the International Swaps and Derivatives Association and major credit derivative dealers. Since then, Creditex and Markit have conducted 41 Credit Event Auctions, including today’s Smurfit-Stone Container auctions, and the process has become an integral part of CDS market infrastructure.
