Credit derivatives are supposed to reduce risk not add to it. But the restructuring of UK electronics company Marconi is proving that the documentation of credit swaps is not as reliable as banks would hope.
Lawyers are unsure whether the company’s $4 billion workout should trigger Marconi swaps. At issue is whether a non-binding agreement to restructure counts as a credit event under definitions written by the International Swaps&Derivatives Association that are used as the basis for most deals.
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