Sep 16, 2019

Bondholders may struggle to check out of Thomas Cook

While a life insurance contract is simple to settle - a person is either alive or dead - the shades of grey in the death of a company make CDS much more unpredictable. Thomas Cook is trying to reorganise its debt in a way that will trigger losses for bondholders. This is exactly the scenario where CDS should pay out. The analogy evokes the high priests of the CDS market: an industry panel of in-house lawyers known as the "Determinations committee", drawn from nine banks and five fund managers, who decide whether swap holders get their windfalls. In the Thomas Cook case, some bondholders worry that even if the company files for protection from creditors in the US courts, it may still not trigger the swaps.

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