December credit default swaps tied to gaming company Caesars Entertainment were not triggered by a disputed bond payment that same month, an industry-appointed board ruled on Monday.
The arbitration panel organized by the International Swaps and Derivatives Association (ISDA) was convened after disagreements about whether the CDS should have been triggered or not.
Other default swaps on Caesars were triggered in January following the firm’s bankruptcy filing, but some market participants said a credit event should have been declared prior to that, following the mid-December payment.
The contracts in question expired on December 20 – but the panel unanimously agreed they will not trigger.
If a credit event had been called, holders of the December 20 contracts would have been paid out based on a market-wide auction following the decision.
The total outstanding net notional of CDS on Caesars is US$26.9bn, the highest tied to any corporate borrower, according to the Depository Trust and Clearing Corporation.
