Markit is gearing up for the launch of the iTraxx LevX Series 2, the second installment of the credit default swap index referencing European corporates. The new series is set to roll on March 17. There will be a pricing call on March 14, which is when the coupon levels are determined. On a conference call this morning, Markit officials announced that the new series includes a number of changes from Series 1, which originally launched in September 2006. Most notable among the changes is that both the senior and subordinated indexes of the LevX Series 2 will now have non-cancellable contracts, or "less cancellable," according to David Geen, general counsel at the International Swaps and Derivatives Association, who spoke on the call. The intention on the non-cancellable contract is that when there is a refinancing, the contract will reference the facility or facilities that refinance the original reference obligation. However, there are some situations where there is no suitable successor credit agreement but the contract will still cancel, Geen said. Another important feature in the Series 2 is the use of interim and final summaries related to successor credit agreements published by Markit. These will be used rather than determinations by individual calculation agents. The senior index will have 75 equally-weighted LCDS for first lien loans and the subordinated index with have 45 equally-weighted LCDS for second and third lien loans, as opposed to 35 equally-weighted names for both indices, respectively, seen in the Series 1. Series 2 will feature semi-annual portfolio rolls with quarterly coupons and a five year maturity, which is similar to the traditional iTraxx indices, Tobias Sproehnle, director at Markit said on the call. The reference obligations in both the senior and subordinated series are weighted the heaviest in cable, telephone companies and wireless with 16% of the total obligations in both indices, with General Industrials and Food and Beverage, making up 13% and 11%, respectively. Markit said it will be providing information on the reference data, including reference credit agreements and reference obligations, included in iTraxx LevX Series 2 for investors for free for thirty days. Dealers will not be redistributing the data, Markit noted.
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