Has Bradford and Bingley, a bank under the control of the UK government, defaulted?
In June the UK lender chose not to pay interest on some of its lower-ranking debt, leaving bondholders nursing steep losses. The bank says it isn’t in default because the government changed the terms of the securities after nationalizing the lender in February. So that’s alright then.
Now ISDA, the derivatives industry body, has ruled that the failure to pay interest will trigger the company’s credit-default swaps.
The decision will mean a bloody payout for the unlucky few who were foolhardy enough to sell protection on the bank’s lower-ranking debt. Recoveries on the contract may be very low, if existent.