This article appears courtesy of Institutional Investor
Source: Credit Investment News
Kim Moore
Delphi's bonds jumped 12 points across the board as investors sought to get hold of bonds to deliver for credit default swap contracts. Delphi's 6.55% '06 bonds jumped to 67 from 55. Investors have to deliver bonds into their credit default swap contracts within 30 days of Delphi's bankruptcy filing to be paid back at par. The company filed for bankruptcy Oct. 8. The main reason bond holders are rushing to deliver bonds is because single-name trades will not be included in the protocol that the International Swaps and Derivatives Association is developing to cash settle credit derivative contracts related to the bankrupt auto parts maker.
ISDA has developed index protocols for bankrupt airlines NorthWest Airlines, Delta Air Lines and bankrupt auto parts maker Collins & Aikman. Delphi's protocol is more complicated to develop because of the large amount of single-name and tranche trades. A draft of the protocol was due out on Friday. A source familiar with the protocol said uncertainty over whether single-name trades would be included in an index protocol had the market a little jumpy.