ISDA has prepared this brief summary of frequently asked questions to assist in your consideration of the Hawaiian Telcom Communications LCDS Auction Settlement Terms (the "Auction Terms").
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 AUCTION TERMS. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING THE AUCTION TERMS. ISDA ASSUMES NO RESPONSIBILITY FOR ANY USE TO WHICH ANY OF ITS DOCUMENTATION OR OTHER DOCUMENTATION MAY BE PUT.
Do I need to adhere to the Auction Terms?
No. If a Credit Event Notice and Notice of Publicly Available Information have been delivered (or deemed delivered under a settlement agreement) on or prior to December 16, 2008 in respect of a covered transaction (see below), then that transaction will be cash settled at the Final Price determined pursuant the Auction Terms.
Scope of Transaction Coverage Relating to the Auction Terms
Will the Auction Terms affect my single name LCDS trades?
Yes. Single name LCDS trades documented under the Syndicated Secured Loan Credit Default Swap Standard Terms Supplement (the “LCDS Standard Terms”) published by ISDA on May 22, 2007 will be subject to the Auction Terms. This includes LCDS transactions documented under the LCDS Standard Terms published by ISDA on June 8, 2006, provided both parties adhered to the ISDA LCDS Protocol. Thus, single name LCDS trades on Hawaiian Telcom Communications, Inc. First Lien Loans documented on this basis will be subject to the procedures set forth in the Auction Terms.
What other credit derivative transactions are affected by the Auction Terms?
Untranched LCDX transactions and portfolio LCDS transactions that reference Hawaiian Telcom Communications, Inc. First Lien Loans will be covered by the Auction Terms if they are documented based on the LCDX Untranched Transactions Standard Terms Supplement published by ISDA and CDS IndexCo on May 22, 2007 and the LCDS Standard Terms published by ISDA on May 22, 2007, respectively. Tranched portfolio LCDS transactions, including LCDX tranche transactions, that reference Hawaiian Telcom Communications, Inc. First Lien Loans will be covered by the Auction Terms if they are documented based on the LCDX Tranche Transactions Standard Terms Supplement published by ISDA and CDS IndexCo on September 25, 2007 or a predecessor draft of that document.
What credit derivative transactions are not affected by the Auction Terms?
Any credit derivative transaction that is not an LCDS transaction, that is not documented in one of the ways described above, or that does not reference Hawaiian Telcom Communications Inc. First Lien Loans will not be affected.
Who runs the auction?
The auction will be administered by Creditex and Markit and not by ISDA.
When is the auction?
The auction will be held on Wednesday, December 17, 2008. Details of the auction results will be posted at www.creditfixings.com.
Cash Settlement Date and Accruals
When is the Cash Settlement Date?
The Cash Settlement Date will be Monday, December 29, 2008.
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. A Physical Settlement Request must be submitted in the form of the Customer Physical Settlement Request Letter set out in Exhibit 5 to the Auction Term. Please click here for a form of Customer Physical Settlement Request Letter. Parties wishing to submit a Customer Physical Settlement Request Letter should contact their dealer that is acting as a Participating Bidder in advance of the auction. A list of Participating Bidders is available on our website.
Following the auction, each party that submitted a Physical Settlement Buy or Sell Request that is matched in the auction will be treated as if they had entered into an agreement with the relevant Participating Bidder on terms equal to a Representative Auction-Settled Transaction (RAST). Parties that 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 in settlement of that transaction. A form of Notice of Physical Settlement is contained as an exhibit to the Auction Term. The deadline for sending this notice is specified as the "Notice of Physical Settlement Date" in the Auction Term.
How are accruals calculated?
For transactions with a payment due on December 22, 2008, the Fixed Rate on the Hawaiian Telcom Portion shall accrue to but exclude December 22, 2008 for purposes of the payment due on that date (for transactions maturing on December 20, 2008, the accrual is to and including December 20, 2008). However, a rebate of the Fixed Rate accrual on the Hawaiian Telcom Portion for the period from and including December 2, 2008, to but excluding December 22, 2008 (or to and including December 20, 2008 in the case of transactions maturing on that day), will be added to the Cash Settlement Amount to be paid to Buyer on the Cash Settlement Date.
For transactions with no payment due between December 2 and December 29 (including long first coupon transactions whose first payment date will occur in March 2009), the Fixed Rate on the Hawaiian Telcom Portion shall accrue to and include December 1, 2008, and will be payable by Buyer on the Cash Settlement Date.