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Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: RockyBalboa who wrote (1518)	11/6/2006 4:30:13 PM
From: RockyBalboa	Read Replies (2) \| Respond to of 6370

For Dura it gets interesting. After finally filing, the next is an auction to determine the huge CDS settlement; I have the feeling that this settlement may be dilutive to bonds and debt of all kind. It is pretty amazing to see that the derivative exposure is a multiple of the debt outstanding... Given the pesky size and the depressed price of the bonds it is entirely possible that the manipulation already took place. Dura CDS settlement protocol due Wednesday -ISDA LONDON, Nov 6 (Reuters) - A protocol for settlement of credit default swaps on bonds of bankrupt U.S. auto supplier Dura Automotive Systems will be launched on Wednesday, the International Swaps and Derivatives Association said on Monday. Investors will have until Nov. 17 to sign up to the protocol, which will for the first time include physical or cash settlement of single name and tranche default swaps, as well as the index trades catered for in previous protocols. The protocol is the latest attempt by the credit derivatives industry to standardise settlement of credit default swaps, sales of which have outstripped their cash bond counterparts. There is around $6 billion of CDS exposure to Dura, bankers estimate, compared with about $1 billion of bonds and $500 million of loans. An auction to determine settlement payments on Dura protection will be held on November 28, an ISDA spokesman said, with two bonds auctioned -- the senior 8.625 percent note due 2012 and the subordinated 9 percent security maturing in 2009. The auction will be administered by Creditex and Markit. Dura filed for bankruptcy protection last Monday, citing high production cuts and pricing pressure. On Wednesday, it won bankruptcy court permission to tap a $50 million loan to cover costs during the bankruptcy case. Some banks have attacked the cash settlement procedure, arguing the auction process is vulnerable to manipulation, but the latest protocol gives investors the option to opt out of the protocol should they so wish. If the auction is deemed a success the protocol is likely to remain in place as an option for future defaults, with a move toward incorporating it permanently in ISDA definitions likely in the medium term, bankers say. "We are moving toward an industry standard, with perhaps a couple more refinements of the process still to come," said Gunnar Stangl, head of index strategy at Dresdner Kleinwort. "We are 90 percent there."