Delphi Corporation
Creditex and Markit Announce Results of Delphi Corporation Credit Event Fixing For Defaulted Bonds
London/New York, November 4, 2005 - Creditex, Inc. ("Creditex") and Markit Group Limited ("Markit"), in partnership with 15 major credit derivative dealers, have successfully conducted a Credit Event Fixing today to generate a cash settlement price for contracts referencing the defaulted bonds of Delphi Corporation ("Delphi") as agreed under the Delphi CDS Index Protocol. Delphi filed for bankruptcy on October 8, 2005, and is included in various credit derivative indices published by CDS IndexCo and Dow Jones. At 10:55 am EST, the final price for certain Delphi bonds was fixed at 63.375%.
The Credit Event Fixings are being used as part of a Protocol developed by the International Swaps and Derivatives Association (ISDA) in consultation with dealers and the broader market. The Protocol enables the 574 adhering institutions to amend their credit derivative index contracts referencing Delphi from physical to cash settlement. The Credit Event Auction was administered by Creditex and Markit to determine the final cash settlement price.
The fixing methodology has been enhanced from previous fixings to significantly reduce the basis risk between cash and physically settled contracts. The new methodology builds on that previously employed by Creditex and Markit in relation to the defaults of Collins & Aikman, Delta Air Lines and Northwest Airlines.
In addition to entering a tradeable bid and offer price as in previous fixings, auction participants were required to represent the bond position they would have held if the contracts had been physically settled. The new methodology reduces the overall basis risk between cash and physically settled contracts by making the participants indifferent between the two settlement methods for contracts covered by the Protocol.
Commented Mazy Dar, Head of Electronic Platforms at Creditex, "The enhanced methodology is a significant step forward in the ongoing development of the Credit Event Fixings and is laying the groundwork for a market-wide solution for a more efficient way to settle large numbers of contracts under a credit event."
"The Delphi Credit Event Fixing was very important because it not only created a cash settlement price, but also enabled participants to transact bonds in the underlying auction, reducing basis risk and at the same time easing settlement issues. It was the largest and most significant auction to date, and marks another milestone in the development of the credit derivative market", said Kevin Gould, Executive Vice President and Head of Data Products and Analytics at Markit.
The Credit Event Fixings are designed to ensure a transparent and fair process which is representative of the trading market level. Creditex provides the electronic platform for the operation of the fixings. Markit verifies the input to guarantee the integrity of the fixings, calculates the prices and publishes them on a freely available web page, www.creditfixings.com
About Creditex
Creditex is the global market leader in e-trading of credit derivatives. The first e-trading platform in credit derivatives, Creditex is used by more than 800 credit derivatives traders at the world's top financial institutions. The platform has electronically executed over $ 0.5 trillion notional in credit default swap (CDS) indices, single-name CDS and standardized structured credit products. In 2005, Creditex pioneered the first Tradeable Credit Fixings, a milestone in bringing additional confidence and transparency to the market by providing a standard benchmark and settlement rate. The firm is also leading the industry in "straight-through processing" initiatives, allowing its growing client base to reduce operational risk and transaction costs. Having received numerous accolades in leading financial media including Credit, Euromoney, Forbes, Institutional Investor and Risk, Creditex's technology continues to set the standard for innovation in the credit derivatives market.
About Markit
Markit is the benchmark industry source for independent pricing and valuations for global financial and energy markets. The company is an independent enterprise with which the world's leading financial institutions and energy traders work to create price transparency. Today, Markit enjoys the sponsorship of 18 financial institutions, who manage assets in excess of $10 trillion, and data contribution relationships with over 50 dealing firms. Markit has 20 market leading services which are used by over 300 institutions globally. Areas of product expertise include OTC derivatives (credit, equity, FX, rates, energy, power, metals and structured products), corporate bonds, syndicated loans, dividend forecasting, and index and ETF management. In 2005, Markit's services to the derivative markets have been acknowledged by the industry with awards from Financial News for Best Derivatives Data Provider, and from Institutional Investor's 'Operations Management' for Vendor of the Year. For more information about Markit, see www.markit.com
Tradeable Credit Fixings Press and Client Contact information:
Creditex
Annette Bronkesh (NY) +1 973 778 8648
Mazy Dar (London) +44 207 400 7383
Markit
Kevin Gould (NY) +1 212 931 4901
Teresa Chick (London) +44 (0)20 7890 5094
Delphi Auction Results
The fixing methodology has been enhanced from previous fixings to significantly reduce the basis risk between cash and physically settled contracts. The new methodology builds on that previously employed by Creditex and Markit in relation to the defaults of Collins & Aikman, Delta Air Lines and Northwest Airlines.
In addition to entering a tradeable bid and offer price as in previous fixings, auction participants were required to represent the bond position they would have held if the contracts had been physically settled. The new methodology reduces the overall basis risk between cash and physically settled contracts by making the participants indifferent between the two settlement methods for contracts covered by the Protocol.
Commented Mazy Dar, Head of Electronic Platforms at Creditex, "The enhanced methodology is a significant step forward in the ongoing development of the Credit Event Fixings and is laying the groundwork for a market-wide solution for a more efficient way to settle large numbers of contracts under a credit event."
"The Delphi Credit Event Fixing was very important because it not only created a cash settlement price, but also enabled participants to transact bonds in the underlying auction, reducing basis risk and at the same time easing settlement issues. It was the largest and most significant auction to date, and marks another milestone in the development of the credit derivative market", said Kevin Gould, Executive Vice President and Head of Data Products and Analytics at Markit.
The Credit Event Fixings are designed to ensure a transparent and fair process which is representative of the trading market level. Creditex provides the electronic platform for the operation of the fixings. Markit verifies the input to guarantee the integrity of the fixings, calculates the prices and publishes them on a freely available web page, www.creditfixings.com
About Creditex
Creditex is the global market leader in e-trading of credit derivatives. The first e-trading platform in credit derivatives, Creditex is used by more than 800 credit derivatives traders at the world's top financial institutions. The platform has electronically executed over $ 0.5 trillion notional in credit default swap (CDS) indices, single-name CDS and standardized structured credit products. In 2005, Creditex pioneered the first Tradeable Credit Fixings, a milestone in bringing additional confidence and transparency to the market by providing a standard benchmark and settlement rate. The firm is also leading the industry in "straight-through processing" initiatives, allowing its growing client base to reduce operational risk and transaction costs. Having received numerous accolades in leading financial media including Credit, Euromoney, Forbes, Institutional Investor and Risk, Creditex's technology continues to set the standard for innovation in the credit derivatives market.
About Markit
Markit is the benchmark industry source for independent pricing and valuations for global financial and energy markets. The company is an independent enterprise with which the world's leading financial institutions and energy traders work to create price transparency. Today, Markit enjoys the sponsorship of 18 financial institutions, who manage assets in excess of $10 trillion, and data contribution relationships with over 50 dealing firms. Markit has 20 market leading services which are used by over 300 institutions globally. Areas of product expertise include OTC derivatives (credit, equity, FX, rates, energy, power, metals and structured products), corporate bonds, syndicated loans, dividend forecasting, and index and ETF management. In 2005, Markit's services to the derivative markets have been acknowledged by the industry with awards from Financial News for Best Derivatives Data Provider, and from Institutional Investor's 'Operations Management' for Vendor of the Year. For more information about Markit, see www.markit.com
Tradeable Credit Fixings Press and Client Contact information:
Creditex
Annette Bronkesh (NY) +1 973 778 8648
Mazy Dar (London) +44 207 400 7383
Markit
Kevin Gould (NY) +1 212 931 4901
Teresa Chick (London) +44 (0)20 7890 5094