Emerging Trends and Developments on ISDA’s Credit Derivatives Definitions: Navigating Implications to the Year Ahead and Beyond
Earlier this year, the International Swaps and Derivatives Association (ISDA) proposed amendments to the 2014 ISDA Credit Derivatives Definition for "narrowly tailored credit events" (NCTE). NCTE is described as an arrangement with a certain corporation that induces a credit event leading to a credit default swap settlement while denigrating the impact on the corporation. However, its proposed amendments relate only to 'failure to pay' credit events. If the amendment is to be adopted, it is expected that market participants will use the amended resolution for new credit default swaps (CDS) contracts, and a market protocol will provide market participants the opportunity to apply the amended definition to existing credit derivative transactions.
Beyond the growth and amendments of this overall policy, market participants should keep in mind that the proposed resolution can present potential ambiguities.
In this LIVE Webcast, financial experts Ignacio Franceschelli (NERA Economic Consulting) and Bjorn Bjerke (Shearman & Sterling LLP) will provide the audience with an in-depth analysis of the recent developments on ISDA’s credit derivatives definitions. As experts, they will also present the important issues surrounding this significant topic including the implications and ambiguities to face for the year ahead.
Key topics include:
- ISDA’s Proposed Amendments – Updates
- ISDA’s Proposed Guidance – What You Should Know
- Implications and Ambiguities
Bjorn Bjerke, Partner
Shearman & Sterling LLP
- Some of the background leading up to ISDA’s publication of the 2019 Narrowly Tailored Credit Event Supplement
- A run through of Codere, iHeart and Hovnanian as examples of the types of arrangements the supplement seeks to curtail
- The supplement’s fix to the problem of manufactured “cheapest to deliver” obligations and engineered failure to pay credit events
- Addressing the subjectivity introduced by the changes through guidance notes
- Where do we go from here:
- other strategies that potentially could impact CDS markets that have not been addressed as part of the NTCE Supplement
- cautionary statements from the regulators
- The difficulties of distinguishing bona fide arrangements from impermissible manipulation
Dr. Ignacio Franceschelli, Senior Consultant
NERA Economic Consulting
- The 2019 Narrowly Tailored Credit Event Supplement by ISDA provides some guidance on whether the credit deterioration requirement is or is not satisfied. Economic analysis of credit default swaps (CDS) can be used to help assess allegations of opportunistic behavior related to CDS and the creditworthiness of a company.
- CDS terminology: Why do investors use CDS? Are there different types of CDS contracts? What is the relation between the CDS spreads (prices) and the lengths of the contracts?
- How CDS prices can identify significant credit risks against a company and changes in these risks.
- Brief history of the RadioShack litigation.
Who Should Attend:
- In-house lawyers
- Transactional Lawyers
- Traders and Bankers
- Market Participants
- Compliance Professionals
Dr. Franceschelli is a Senior Consultant in NERA’s Securities and Finance Practice. He specializes in the analysis of complex securities including mortgage-backed securities and collateralized debt obligations.
Since joining NERA he has provided support to expert testimony related to the credit crisis and the resultant litigation. He has managed projects involving RMBS litigation and his work comprises the analysis of securitized mortgage loans including sampling design and mortgage default and loss severity econometric models to estimate future collateral losses. He has also analyzed the factors that influence loan pricing in projects concerning mortgage discrimination claims.
Dr. Franceschelli is a Senior Consultant in NERA’s Securities and Finance Practice. He specializes in the analysis of complex securities …
Bjorn Bjerke is a partner in the Finance practice and resident in the New York office. He focuses his practice on representing lenders, borrowers, managers and investors in a broad range of complex financing arrangements across a wide spectrum of asset classes including securitizations and other structured financings, various shared collateral and second lien structures, repo facilities, commodity, equity, credit and fund linked derivatives, subscription lines and a variety of funding arrangements tailored to existing purchase commitments such as energy management agreements and airline frequent flyer miles programs. In addition, he has extensive experience representing investors, creditors and managers in complex restructurings, work-outs and acquisitions of distressed and nonperforming assets. He is involved in all aspects of deal structuring, negotiation and documentation.
Bjorn Bjerke is a partner in the Finance practice and resident in the New York office. He focuses his practice …
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Method of Presentation:
General knowledge of finance laws
NY Category of CLE Credit:
Areas of Professional Practice
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About NERA Economic Consulting
NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.
About Shearman & Sterling LLP
Shearman & Sterling’s success is built on our clients’ success. We have distinguished history of supporting our clients wherever they do business, from major financial centers to growing markets. We have over 850 lawyers globally speaking more than 60 languages. With lawyers in New York, London, Washington, D.C. and Frankfurt, Shearman & Sterling’s Structured Finance & Securitization Group assists clients in developing, structuring and executing a broad range of financings including securitizations, structured products, asset-based lending, tailored leasing and royalty arrangements and other sophisticated financing techniques. We have in-depth experience in all aspects of the public and private offering and distribution of structured finance securities. Highly regarded by major corporations and financial institutions, we represent the entire range of global market participants, including issuers, underwriters, investors, trustees, servicers, credit-enhancement providers, lenders, rating agencies and conduits. We also advise numerous corporations on structures and legal issues relating to their use of derivatives products, including the end-user exception from mandatory clearing and trading requirements, reporting and record-keeping, and ISDA, Dodd-Frank and EMIR protocols.