2006 Dura CDS Protocol

The 2006 Dura CDS Protocol (the “Protocol”) relates to settlement issues concerning Dura Operating Corp. ("Dura"), a U.S. company that filed for bankruptcy on October 30, 2006. Dura is an auto parts supply company that is included in various credit derivative indices, including those published by Dow Jones CDX and TRAC-X, as well as the subject of single name trades and other credit derivative transaction types. The purpose of the Protocol is to offer market participants an efficient way to address the settlement issues relating to credit derivative transactions referencing Dura. The Protocol will offer institutions the ability to amend their documentation for various credit derivatives transactions in order to utilize an auction scheduled for November 28, 2006 to determine the final price for certain Dura bonds. Markit Group Limited and Creditex, Inc. will administer the auction.

It should be noted that there is no adherence fee required for ISDA members or non-ISDA members submitting Adherence Letters in connection with the 2006 Dura CDS Protocol.

The 2006 Dura CDS Protocol is open to ISDA members and non-members. The Protocol will be open between November 8, 2006 and November 17, 2006.

PLEASE NOTE: THIS PROTOCOL IS CLOSED.

The following documents must be submitted via email to the ISDA office in New York in order to adhere to the 2006 Dura CDS Protocol:

  • One signed copy of the Adherence Letter, providing information on the contact person at the Adhering Party.
  • One conformed copy of the Adherence Letter. A conformed copy is an exact copy of the signed letter with the name of the person signing the letter typed on the signature line. A signature should not appear on the conformed copy of the letter.

ISDA will only accept email delivery of Adherence Letters. An Adhering Party is not required to send original Adherence Letters to the ISDA offices.

Please submit all Adherence Letters via email to duraprotocol@isda.org. It is critical that both a scanned, signed Adherence Letter, as well as a scanned, conformed Adherence Letter is submitted. Entities will not be deemed to have adhered to the Protocol until both the signed and conformed Adherence Letters are submitted by email in accordance with the Adherence Period.

No other documents are required in order to adhere to the 2006 Dura CDS Protocol. Supporting documentation, such as board resolutions or a list of authorized signatures, can be provided and will be held in safekeeping by ISDA, but it is not necessary to submit such documents in order to adhere to the Protocol. Access to supporting documentation will only be provided if requested in writing.

The Protocol will open for adherence on Wednesday, November 8, 2006.

Email address for Delivery of Adherence Letters:
duraprotocol@isda.org

Policy Regarding Conformed Copies
A signed copy and a conformed copy of an Adherence Letter must be received in order for ISDA to list a party as having adhered to the 2006 Dura CDS Protocol.

The most common problem experienced in the adherence process for prior Protocols was the failure to include a conformed copy of the Adherence Letter. We remind parties that a conformed copy, together with a signed copy, must be submitted to ISDA in connection with adherence to the 2006 Dura CDS Protocol.

Frequently Asked Questions

ISDA has prepared this brief summary of frequently asked questions to assist in your consideration of the 2006 Dura CDS Protocol (the “Dura 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 DURA PROTOCOL. PARTIES SHOULD CONSULT WITH THEIR LEGAL ADVISERS AND ANY OTHER ADVISER THEY DEEM APPROPRIATE PRIOR TO USING OR ADHERING TO THE DURA PROTOCOL. 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 the Dura Protocol; and (iii) questions relating to the substance of the Dura Protocol itself.

Adherence Letter Submission Process
When do I need to send in my Adherence Letter? 
The Dura Protocol is open between 9:00 a.m. New York Time on Wednesday, November 8, 2006 and 5:00 p.m. New York Time on Friday, November 17, 2006. Any entity must email its Adherence Letter to ISDA by 5:00 p.m. New York Time on Friday, November 17, 2006, or it will not be able to participate in the Dura Protocol.

How do I send in my Adherence Letter?
All Adherence Letters must be delivered by email to duraprotocol@isda.org. In the email, you must submit both your conformed and executed copies of the Adherence Letter.

The Adherence Letter(s) should be on your institution’s letterhead. Nothing in the form 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.

You are not required to send your original Adherence Letter(s) by mail to ISDA.

What is a conformed copy?
A conformed copy of the Adherence Letter means that the name of the authorized 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 authorized signatory?
An authorized 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 must indicate the following in the signature block: “Investment/Asset Manager, acting on behalf of the funds and accounts listed in the relevant Master Agreement between it and another Adhering Party”. 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 Dura Protocol.

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 3 of the Dura 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 letter published in the 2006 Dura CDS Protocol. You may obtain a copy of the form Adherence Letter by visiting the ISDA website, www.isda.org and clicking on “2006 Dura CDS Protocol” and then clicking on “Form of Adherence Letter”.

Does it cost any money to adhere to the Dura Protocol? 
No.

Entities Electing Not to Adhere to the Dura Protocol
What happens if my institution or fund does not adhere to the Dura Protocol?
If your institution or fund elects not to participate in the Dura Protocol, then you must bilaterally settle each of your trade(s) with each of your counterparties as such trade(s) relate to Dura Operating Corp. You will not be able to take advantage of the auction mechanic and should contact your counterparty or counterparties immediately if you do not plan to participate in the Dura Protocol.

Scope of Transaction Coverage Relating to the Dura Protocol
Does adhering to the Dura Protocol affect my single name trades?
Yes. Single name trades will be part of the auction process provided for by the Dura Protocol. Thus, single name trades on Dura Operating Corp. will be subject to the procedures set forth in the Dura Protocol.

Does adhering to the Dura Protocol affect other credit derivative transactions?
Yes. In addition to single and index credit derivative transactions referencing Dura, the following transactions are also covered in the Dura Protocol: Constant Maturity Swap Transaction, a Principal Only Transaction, an Interest Only Transaction, First to Default Transaction, Nth to Default Transaction, Recovery Lock Transaction, Bespoke Portfolio Transaction, Single-Name Swaption and Portfolio Swaption.

What credit derivative transactions are not affected by adhering to the Dura Protocol?
Reference Obligation Only Transactions, Loan Only Transactions, Preferred CDS Transactions, Fixed Recovery Transactions, or any other transaction for which any of the Deliverable Obligations specified in the Dura Protocol for the relevant type of trade (e.g., senior vs. subordinate) would not qualify as Deliverable Obligations, are not covered under the Dura Protocol.

Auction
Who runs the auction?
The auction will be administered by Creditex and Markit and not by ISDA.

When is the auction?
There will be two auctions on Tuesday, November 28, 2006 - one for the Subordinated Obligations of Dura and one for the Senior Obligation of Dura. 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 is expected to be Tuesday, December 12, 2006.

How are accruals calculated?
There will not be a rebate of the Fixed Rate accrual on the Dura Portion. The Seller will be required to deduct the accrued amount from the Cash Settlement Amount payable on the Cash Settlement Date, expected to be December 12, 2006. Accrued amounts will be calculated up to and including October 30, 2006.