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

To: RockyBalboa who wrote (1562)	10/28/2007 1:01:09 PM
From: RockyBalboa	Read Replies (3) \| Respond to of 6370

WARNING: In stark contrast to the low balled Dura (25% for defaulted senior bonds) settlement: Here s the auction result for MOVIE GALLERY loans: an amazing 91.500%. This underscores either: how questionable the Ch.11 for MOVIQ is, or how inefficiently credit markets price debt securities. Please, be aware that MOVI defaulted on interest payments on its best debt. There is no way that defaulted paper trades anywhere near 60% let alone 90% in an efficient market. Call it a political price or whatever: With the open interest to buy so small (30.5MM), 91% is a rather insignificant price level. As a buyer of CDS I d be thoroughly pissed. >>>>>>>>>>>>>>>>>>>>>>>>>> MARKIT & CREDITEX ANNOUNCE FINAL RESULTS OF MOVIE GALLERY, INC. CREDIT EVENT AUCTION Final Auction Price is 91.5% London and New York, October 23, 2007 – Markit Group Limited (“Markit”) and Creditex Group Inc. (“Creditex”), in partnership with 11 major credit derivative dealers, have successfully conducted a Credit Event Auction to generate a cash settlement price for contracts referencing loans of Movie Gallery, Inc. At 2.00pm EST, the final price for specific Movie Gallery loans was fixed at 91.5%. Creditex and Markit are the official administrators of the Credit Event Auctions. Movie Gallery, Inc., a US video store chain, failed to make a September 10, 2007 interest payment on its first lien loan. This triggered a ‘failure to pay’ credit event on loan CDS (“LCDS”) contracts referencing the company. Movie Gallery, Inc. was also a constituent of the LCDX, a credit default swap index referencing US leveraged loans. The Credit Event Auction enabled institutions to cash settle LCDS and LCDX index trades (or cash settle and exchange physical loans) at the final auction price. The Credit Event Auction was run in accordance with the LCDS Settlement Terms published by ISDA on May 22, 2007 creditex.com creditfixings.com >>>>>>>>>>>>>>>>>>>>>>>>>> Auction sets initial results for Movie Gallery loans Tue Oct 23, 2007 11:10am EDT NEW YORK, Oct 23 (Reuters) - The initial price of defaulted loans of Movie Gallery Inc was set on Tuesday morning as part of an auction to determine the value of derivatives on the bankrupt company's debt. The indicative price of Movie Gallery's (MOVI.O: Quote, Profile, Research) loans is 90.875 percent of par, based on an auction by 11 dealers, the administrators of the auction, Markit and Creditex, said in a news release. The final price will determined at 2 p.m. (1800 GMT) Movie Gallery, the second-biggest U.S. video rental chain, last week filed for Chapter 11 bankruptcy protection to slash debt and reorganize as it faces competition from lower-cost rivals like online DVD rental company Netflix Inc (NFLX.O: Quote, Profile, Research) and others. For details, see [ID:nN16406035]. Credit default swaps protect against borrowers defaulting on their debt. When a borrower fails to pay, the contract is triggered and protection sellers compensate protection buyers for the amount of debt insured, minus the amount of principal the debt recovers after default. Based on the indicative level, this would mean that the amount of principal the loans recover would be 90.875 percent of par. Thus a buyer of protection would be compensated 9.125 percent the amount of debt insured. reuters.com