ISDA has prepared this brief summary of frequently asked questions to assist in your consideration of the 2009 Abitibi CDS Protocol, the 2009 Capmark CDS Protocol, the 2009 Charter Communications CDS Protocol and the 2009 Idearc CDS Protocol (each, a “Protocol”).
THIS FREQUENTLY ASKED QUESTIONS DOES NOT PURPORT TO BE AND SHOULD NOT BE CONSIDERED A GUIDE TO OR AN EXPLANATION OF ALL RELEVANT ISSUES OR CONSIDERATIONS IN CONNECTION WITH THE PROTOCOLS. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE PROTOCOLS. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE PUT.
This Frequently Asked Questions webpage is divided into three sections: (i) questions relating to the submission of Adherence Letters; (ii) questions relating to the election of an entity not to participate in a Protocol; and (iii) questions relating to the substance of the Protocols including physical settlement.
Adherence Letter Submission Process
There are four protocols but only one form of Adherence Letter?
That's right. Each entity wishing to sign up to any or all of the Protocols should complete the Adherence Letter and indicate in that Adherence Letter by checking the appropriate box(es) which Protocols it wishes to participate in.
The Adherence Letter refers to four protocols but I only want to sign up to one of them?
That's ok. Simply check the box in the Adherence Letter opposite the Protocols that you want to sign up to. You will not be deemed to have signed up to a Protocol that you do not check unless you do not check any box, in which case, you will be deemed to have signed up to all four Protocols. It is, therefore, important if you wish to stay out of a particular Protocol that you expressly indicate which Protocols you are participating in by checking the appropriate box leaving the box related to any Protocol you do not wish to participate in blank.
When do I need to send in my Adherence Letter?
The Protocols will open for adherence on Thursday April 9, 2009 and remain open until 5:00 p.m. New York Time on Wednesday April 15, 2009. Any entity must email its Adherence Letter to ISDA by 5:00 p.m. New York Time on Wednesday, April 15, 2009, or it will not be able to participate in any of the Protocols.
How do I send in my Adherence Letter?
All Adherence Letters must be delivered by email to ACCIProtocol@isda.org. In the email, you must submit both your conformed and executed copies of the Adherence Letter. Click here for a sample of a conformed letter. Click here for a sample of a signed letter.
The Adherence Letters should be on your institution’s letterhead. Nothing in the form of Adherence Letter available on ISDA’s website may be changed with the exception of completing the details of your institutional name, date and signature block and checking the relevant box(es).
You are not required to send your original Adherence Letters by mail to ISDA.
What is a conformed copy?
A conformed copy of the Adherence Letter means that the name of the authorised signatory (for example, Patricia Smith) is typed rather than having Patricia Smith’s actual signature on the letter. ISDA only posts on its website the conformed copy of all Adherence Letters.
You must also submit an executed, or signed, copy of the Adherence Letter in addition to the conformed copy of the Adherence Letter. ISDA keeps the executed copy of the Adherence Letter for its files and does not share the executed copy with anyone else.
Who is an authorised signatory?
An authorised signatory to the Adherence Letter is an individual who has the legal authority to bind the adhering institution.
What if I am an investment or asset manager – how do I complete the signature block?
If you are an investment or asset manager and act on behalf of multiple funds, you may indicate the following in the signature block: “Investment/Asset Manager, acting on behalf of each of the funds and accounts listed in the relevant Master Agreement (or other agreement which deems a Master Agreement to have been created) between it and another Adhering Party”. Click here for an example. A separate Adherence Letter for each fund or account does not need to be submitted to ISDA. Further, no specific names of clients of the investment/asset manager will be publicly disclosed on the ISDA website in connection with the Protocol.
As an alternative, an investment or asset manager may list the specific funds that are adhering to the Protocols by indicating in the signature block: "Investment/Asset Manager, acting on behalf of the funds and accounts listed below". Click here for example. Please note that in this case the names of those funds must be provided and will be publicly disclosed on the ISDA website.
However, in order for Physical Settlement Requests to be calculated by Participating Bidders, each such investment/asset manager is required to provide a list of all funds and accounts that it acts on behalf of to each Participating Bidder that has (or whose affiliate has) entered into a Master Agreement with any of those funds or accounts. As provided in paragraph (1) of the Auction Methodology set out in Exhibit 2 of the relevant Protocol, on the Business Day prior to the Auction Date, the Administrators (Markit and Creditex) will publish a list of the Participating Bidders on their respective websites. In addition, contact details will be available for the Participating Bidders through their Adherence Letters on the ISDA website.
Can I change the text of the Adherence Letter?
No. The Adherence Letter must be in the same format as the form of letter published in the Protocols. You may obtain a copy of the form Adherence Letter by visiting the ISDA website, www.isda.org and clicking on “2009 Abitibi/Capmark/Charter/Idearc CDS Protocols” and then clicking on “Form of Adherence Letter”.
Does it cost any money to adhere to the Protocol?
Entities Electing Not to Adhere to the Protocol
What happens if my institution or fund does not adhere to the Protocol?
If your institution or fund elects not to participate in a Protocol, then you must bilaterally settle each of your trade(s) with each of your counterparties as such trade(s) relate to Abitibi, Capmark, Charter or Idearc as appropriate. You will not be able to take advantage of the auction mechanic for the relevant entity and should contact your counterparty or counterparties immediately if you do not plan to participate in a Protocol.
Scope of Transaction Coverage Relating to the Protocol
Does adhering to the Protocol affect my single name trades?
Yes. Single name trades will be part of the auction process provided for by the Protocol. Thus, single name trades on Abitibi, Capmark, Charter, or Idearc (as applicable) will be subject to the procedures set forth in the applicable Protocol.
Does adhering to the Protocol affect other credit derivative transactions?
Yes. In addition to single name credit derivative transactions referencing Abitibi, Capmark, Charter or Idearc (as applicable), the following transactions are also covered in each of the Protocols: Constant Maturity Swap Transactions, Principal Only Transactions, Interest Only Transactions, First to Default Transactions, Nth to Default Transactions, Recovery Lock Transactions, Bespoke Portfolio Transactions, Single-Name Swaptions and Portfolio Swaptions.
What credit derivative transactions are not affected by adhering to the Protocol?
Reference Obligation Only Transactions, Loan Only Transactions, Preferred CDS Transactions and Fixed Recovery Transactions are not covered under any of the Protocols.
Who runs the auction?
The auctions will each be administered by Creditex and Markit and not by ISDA.
When is the auction?
The auctions will take place on:
- April 17 to determine the final price for certain Abitibi obligations pursuant to the 2009 Abitibi CDS Protocol;
- April 22 to determine the final price for certain Capmark obligations pursuant to the 2009 Capmark CDS Protocol
- April 21 to determine the final price for certain Charter obligations pursuant to the 2009 Charter CDS Protocol
- April 23 to determine the final price for certain Idearc obligations pursuant to the 2009 Idearc CDS Protocol
Details of the auction results will be posted at www.creditfixings.com.
Physical Settlement through the Auction
I want to physically settle through the auction. What do I have to do?
Parties who wish to deliver or receive Deliverable Obligations may place a Physical Settlement Request with a Participating Bidder. A Physical Settlement Request is an order to sell or buy Deliverable Obligations at the Final Price. Any customer that wishes to submit a Customer Physical Settlement Request to a Participating Bidder must submit a valid Customer Physical Settlement Request Letter to the relevant Participating Bidder on or prior to 5:00 p.m. New York time on the Business Day prior to the Auction Date. Following the auction, parties who submitted a Physical Settlement Sell Request must send a Notice of Physical Settlement to the relevant Participating Bidder, specifying which Deliverable Obligations they will deliver. A form of the Notice of Physical Settlement is contained as an exhibit in the Protocol document. The deadline for sending this notice is specified as the "Notice of Physical Settlement Date" in the Protocol.
If I want to deliver Deliverable Obligations in a currency other than USD, how is the FX calculated?
All Physical Settlement Requests and Limit Order Submissions are denominated in USD, however for trades generated by the matching of these orders, Deliverable Obligations denominated in certain other currencies may be delivered. In this case, the FX rate used to calculate how much of the non-USD Deliverable Obligation may be delivered is determined by the Calculation Agent using the Federal Reserve Bank of New York 10:00 a.m. (New York time) mid-point rate as displayed on Reuters Page FEDSPOT on the date the Notice of Physical Settlement is effective (or, if the Notice of Physical Settlement is changed on or prior to the Physical Settlement Date, the date notice of the last such change is effective), or in such other commercially reasonable manner as it shall determine after consultation with the parties.
Cash Settlement Date and Accruals
When is the Cash Settlement Date?
The Cash Settlement Date for Abitibi is April 24, 2009
The Cash Settlement Date for Capmark is April 29, 2009
The Cash Settlement Date for Charter is April 28, 2009
The Cash Settlement Date for Idearc is May 1, 2009