Abitibi-Consolidated misses loan payment
Abitibi-Consolidated, a subsidiary of AbitibiBowater, failed to make payment on its loan this month.
Abitibi-Consolidated won court protection early this month that would not allow creditors to accelerate debt payments due to the loan default until its restructuring is completed.
But that protection does not apply to the company’s credit default swaps that insure the debt.
A credit default swap (CDS) is a credit derivative contract between two counterparties. The buyer makes periodic payments to the seller, and in return receives a payoff if an underlying financial instrument defaults.
The International Swaps and Derivatives Association said today that it will launch a protocol that will allow payments on the credit default swaps to be made in a cash auction.
Abitibi-Consolidated CDS triggered by loan miss (Reuters)
AbitibiBowater Credit-Default Swaps to Be Settled at Auction (Bloomberg)