Will Auto Co. Credit Default Swaps Get Swamped? (GM)(F)
It may be old school but for every action their is an equal and opposite reaction.
Take the auto bailout. It turns out that creating a car czar with special powers over The Big Three could trigger payments under credit default swaps cover debt in the companies.
According to MarketWatch, “Banc of America Securities analyst Glen Taksler noted that the International Swaps and Derivatives Association, the trade group that acts as a standard-setter for credit-derivatives trading, says one trigger for a bankruptcy credit event is the appointment of an administrator, trustee or similar official to oversee all or most of an entity’s assets.”
Between GM (GM) and Ford (F) there are almost $6 billion in net swaps outstanding.
Douglas A. McIntyre