Rochester,NY 9/1/2009 9:22:19 PM
Thomson S.A. TMS, Dealers Tear Up $16 Billion of Thomson Default Swaps
Thomson S.A.
Credit-default swaps dealers canceled 6,850 contracts linked to Thomson SA, eliminating duplicate trades worth $16 billion.
Banks hold redundant contracts because they both buy and sell default protection on the same company with different customers. Tearing up offsetting swaps will make it easier to settle remaining contracts that may be triggered after Thomson deferred payments on private notes.
The electronics company’s credit event is the first since the so-called Small Bang standardized default swaps on European companies in July, allowing contracts triggered by debt restructuring to be settled at auctions. The Paris-based company is trying to reorganize 2.8 billion euros ($4 billion) of debt to avert bankruptcy.
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