DERIVATIVES: Victor Company of Japan to have one auction

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Asia

The International Swaps and Derivatives Association said today that one auction will be held to settle relevant transactions in respect of JVC Kenwood’s subsidiary Victor Company of Japan. ISDA’s Japan Credit Derivatives Determinations Committee resolved the matter last week and determined that a restructuring credit event had occurred.

Barclays first raised the issue with ISDA last August, questioning whether the company’s debt-for-equity swap qualified as a credit event due to deterioration in the creditworthiness or financial condition of the bond issuer (see IFR’s “ISDA shies away from JVC Kenwood.” ) The credit event decision on JVC Kenwood’s ¥20bn (US$260m) debt for equity swap was delayed several times.

JVC Kenwood Corporation said by the resolution of the bondholders’ meeting held in August that in relation to the unsecured bond issued in August 2007 by subsidiary Victor Company of Japan, the modification of the terms and conditions of the bond was approved.

According to ISDA, “the term modification became effective on August 25, 2011 upon the satisfaction of the condition that JVC Kenwood had not resolved to cancel the issuance of stock acquisition rights that JVC Kenwood resolved to issue to the holders of the bond on August 1, 2011.”

Additionally, ISDA noted that one of the reasons for implementing the term modification was that JVC Kenwood and subsidiary Kenwood Corporation had not acquired any rating, while the rating on JVC decreased compared with the time when JVC issued the unsecured bonds in August 2007, making it difficult to issue new bonds.