Markit and Creditex, in partnership with six major credit derivative dealers, todayannounced the results of a Credit Event Auction conducted to facilitate settlement of loan-only creditdefault swap (LCDS) trades referencing Ferretti first lien loans.
At 10.30 GMT today, the final price for Ferretti first lien loans for the purpose of settling LCDS transactions was determined to be 10.875%. Sellers of Ferretti first lien LCDS protection willtherefore need to pay 89.125% of the amount of protection they sold.
This price was determined following the initial bidding period. This is because there was no openinterest from market participants for physical settlement during the initial bidding period, removing theneed for a second phase of the auction process.
Markit and Creditex are the official administrators of Credit Event Auctions, which enable marketparticipants 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 Markitelectronically. Markit calculates and verifies the results, and publishes themon www.creditfixings.com.
The Credit Event Auction process was launched in 2005 by Markit and Creditex in collaboration withthe International Swaps and Derivatives Association (ISDA) and major credit derivative dealers.Since then, Markit and Creditex have conducted 42 Credit Event Auctions, including today’s Ferrettiauction, and the process has become an integral part of the CDS market’s infrastructure.
