Markit and Creditex, along with six major credit derivative dealers, announced the results of a credit event auction conducted to facilitate settlement of loan-only credit default swap (LCDS) trades referencing Ferretti first-lien loans.
The final price for Ferretti first-lien loans for the purpose of settling LCDS transactions was determined to be 10.875%.
Sellers of Ferretti first lien LCDS protection will therefore need to pay 89.125% of the amount of the protection they sold.
In a release, Markit said that this price was determined following the initial bidding period. This is because there was no open interest from market participants for physical settlement during this period, removing the need for a second phase for the auction process.
Markit and Creditex are the official administrators of credit event auctions, which enable market participants to cash settle credit derivative transactions. During a credit event auction, dealers submit orders electronically on the Creditex platform.
The credit event auction process was launched in 2005 by Markit and Creditex along with the International Swaps and Derivatives Association and major credit derivative dealers.
Since then, Markit and Creditex have conducted 42 credit event auctions, including todays Ferretti auction.