AMSTERDAM (Dow Jones) - The international supervisor of the derivatives industry, the International Swaps & Derivatives Association (ISDA), performs March 4th again calls on credit default swaps (CDS) case of the recently nationalized SNS Real SA (SR.AE).
The ISDA Wednesday was inconclusive about whether and what SNS-bonds may be eligible for compensation, according to the minutes of the meeting.
The supervisor declared the nationalization of SNS earlier this month to one credit event, meaning that subordinated bondholders are entitled to compensation, provided they CDS contracts have ended their SNS bonds. These credit default swaps are derivatives that protect investors against default by the issuers of bonds which they have invested.
A credit event there are one or more auctions to place as the distribution price should be fixed. It should identify the ISDA bonds as deliverables are considered, so which securities eligible for any compensation.
However, because the SNS subordinated bonds are expropriated, they are not necessarily available for this process. The Council of State ruled earlier this week that the expropriation of shareholders and subordinated bondholders in the nationalization of SNS according to the rules has expired, which means that shareholders and bondholders their belongings lost.
The CDS case on the SNS-bonds considered as a test for the European bond and derivative products intended to guarantee a default. When bondholders with CDS contracts do not receive compensation, any such guarantee products less attractive and investors also may be less willing to invest in European bank bonds, so consider market followers.
