GM Filing Will Trigger Settlement Of $3 Billion In CDS Deals
31 Mai 2009 - 9:37PM
Dow Jones News
The expected bankruptcy filing by General Motors Corp. (GM) will
trigger the settlement of around $3 billion in credit-default swaps
written against the auto maker.
The filing is expected Monday, with the resolution committee of
the International Swaps and Derivatives Association, which groups
the leading credit derivative dealer banks, deciding on a
settlement plan that will likely involve an auction in around a
month.
The Depositary Trust & Clearing Corp. reported a net
notional $2.3 billion in credit protection contracts outstanding on
GM as of May 22, involving 4,820 contracts. Another $776 million in
protection was held against indexes that included GM.
The number and value of CDS contracts written on GM, which
together with its financing arm, GMAC LLC, was once the largest
issuer of corporate debt, have fallen significantly in recent years
as the auto maker's woes intensified and the derivatives markets
moved toward streamlining contracts. GM doesn't figure in the top
10 of outstanding single-name CDS contracts, reflecting the credit
crisis and concerns about sovereign creditworthiness.
Financial service companies and sovereign issuers dominate the
rankings, according to the DTCC data, led by Italy and General
Electric Corp. (GE). Net contracts related to Ford Motor Co. (F)
stand at $1.92 billion, with another $5 billion for its finance
arm, Ford Motor Credit.
With its common equity expected to be wiped out by a bankruptcy
filing, GM shares closed at 75 cents on Friday after slipping below
$1 for the first time since 1933. Administration officials have
said GM could remain in private hands for up to 18 months while it
restructures, entailing its substitution in the benchmark Dow Jones
Industrial Index.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135;
doug.cameron@dowjones.com