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Jul 9, 2009

No B&B default? Oh yes it is

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.

    • About Neil

      "Neil Unmack is a Reuters Breakingviews columnist based in London. He covers credit markets, hedge funds, and Italy. Previously he was a corporate finance reporter at Bloomberg News in London. He started his career as a financial journalist in 2001 at Euromoney Institutional Investor, where he covered structured finance for EuroWeek magazine. He was educated at Eton College and Oxford University, graduating with a first class degree in modern languages. Follow Neil on Twitter @unmack1"
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