(Reuters) -A derivatives committee ruled on Monday that a bankruptcy credit event had not occurred in relation to Credit Suisse, quashing investors’ efforts to trigger a payout on credit insurance linked to the Swiss lender.
“The DC determined that a Bankruptcy Credit Event had not occurred,” the EMEA Credit Derivatives Determination Committee (CDDC) said in a statement on its website.
The Swiss bank in March was taken over by UBS in a state-assisted deal that wiped out holders of Credit Suisse’s $17 billion in Additional Tier 1 (AT1) debt, upending a long-established practice of giving bondholders priority over shareholders in a debt recovery.
The ruling was a response to an investor question about senior and subordinated bonds with respect to Standard European Corporate, Standard European Financial Corporate and Standard European Contingent Convertible (CoCo) Financial Corporate Transaction Types, the committee added.
The DC reviewed the public information submitted with the question and decided that such information did not confirm that a Credit Event had occurred, the committee said.
Credit Suisse was not part of the convened committee regarding the question that was posed to the committee as the bank abstained under the committee’s rules.
Investors tried last week to secure a payout on the credit default swaps (CDS) linked to Credit Suisse debt by seeking a ruling on whether a so-called government intervention credit event had occurred.
However, the committee decided this was not the case last Wednesday.
A payout on the instrument that insures investor’s exposure against default of a company or country only triggers if the committee rules that a credit event has happened.
Hundreds of lawsuits have been filed over terms of the emergency deal to save Credit Suisse, which was hammered out over a March weekend amid turmoil in the global banking sector.
The amount of gross notional outstanding CDS linked to Credit Suisse bonds stood at more than $19 billion in March, according to Depository Trust & Clearing Corporation data. The DTCC provided no details of what seniority of bonds the CDS contracts were written against.
(Compiled by the Global Finance & Markets Breaking News team; Editing by Richard Chang)
