2008 Tembec CDS Protocol

The 2008 Tembec CDS Protocol (the “Protocol”) relates to settlement issues concerning Tembec Industries Inc. ("Tembec"), a unit of Tembec Inc. that filed a Chapter 15 petition in the United States on September 4, 2008. Tembec is a forest products company that is included in various CDX credit derivative indices and is also 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 Tembec. The Protocol will offer institutions the ability to amend their documentation for various credit derivatives transactions in order to utilize an auction scheduled for October 2, 2008 to determine the final price for the Tembec loan. Markit Group Limited and Creditex Securities Corp. will administer the auction.

The 2008 Tembec CDS Protocol is open to ISDA members and non-members. The Protocol will be open between September 17, 2008 and September 26, 2008.

CDS Accruals under Tembec, Fannie Mae and Freddie Mac CDS Protocols
The September 22nd payment is expected to work in the same fashion for Lehman.  We will add the rebate calculation for Lehman and make the finalized document available on the ISDA website.

Attached please find a sheet that summarizes the relevant accrual and rebate calculations for single name, CDX untranched and CDX tranche transactions that are affected by Tembec, Fannie and Freddie.

Should you have any questions, please contact us.


The following documents must be submitted via email to the ISDA office in New York in order to adhere to the  2008 Tembec 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 TembecProtocol@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.

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

No other documents are required in order to adhere to the 2008 Tembec 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, September 17, 2008.

Email address for Delivery of Adherence Letters:

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 2008 Tembec 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 2008 Tembec CDS Protocol.

Frequently Asked Questions

ISDA has prepared this brief summary of frequently asked questions to assist in your consideration of the 2008 Tembec CDS Protocol (the “Tembec Protocol”).


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 Tembec Protocol; and (iii) questions relating to the substance of the Tembec Protocol itself.

Adherence Letter Submission Process
When do I need to send in my Adherence Letter? 
The Tembec Protocol is open between 9:00 a.m. New York Time on Wednesday, September 17 and 5:00 p.m. New York Time on Friday, September 26, 2008. Any entity must email its Adherence Letter to ISDA by 5:00 p.m. New York Time on Friday September 26, 2008, or it will not be able to participate in the Tembec Protocol.

How do I send in my Adherence Letter?
All Adherence Letters must be delivered by email to TembecProtocol@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 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 that have entered into covered transactions under the Tembec Protocol, you may adhere on behalf of all of those funds by indicating 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”  Click here for 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 Tembec Protocol.

As an alternative, an investment or asset manager may list the specific funds that are adhering to the Protocol, 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 will be publicly disclosed on the ISDA website.

Whichever method is used, 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 Tembec 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 2008 Tembec CDS Protocol. You may obtain a copy of the form Adherence Letter by visiting the ISDA website, www.isda.org and clicking on “2008 Tembec CDS Protocol” and then clicking on “Form of Adherence Letter”.

Do I need to reference a DTCC number on the Adherence letter?  What are the implications if I do not?
You are strongly encouraged to provide the DTCC number for operational efficiency, but you are not required to provide the number

Does it cost any money to adhere to the Tembec Protocol? 

Entities Electing Not to Adhere to the Tembec Protocol
What happens if my institution or fund does not adhere to the Tembec Protocol?

If your institution or fund elects not to participate in the Tembec Protocol, then you must bilaterally settle each of your trade(s) with each of your counterparties as such trade(s) relate to Tembec Industries Inc. 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 Tembec Protocol.

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

Does adhering to the Tembec Protocol affect other credit derivative transactions?
Yes. In addition to single and index credit derivative transactions referencing Tembec, the following transactions are also covered in the Tembec 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 (which term would include portfolio transactions relating to TRAC-X, JPMorgan HYDI and Tracers indexes), Single-Name Swaption and Portfolio Swaption.

What credit derivative transactions are not affected by adhering to the Tembec Protocol?
Reference Obligation Only Transactions, Loan Only Transactions, Preferred CDS Transactions and Fixed Recovery Transactions are not covered under the Tembec Protocol.

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

When is the auction?
The auction will take place on October 2, 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 is expected to be October 15, 2008.

How are accruals calculated?
The Fixed Rate on the Tembec Portion shall accrue to but exclude September 22, 2008 for purposes of the payment due on that date. However, a rebate of the Fixed Rate accrual on the Tembec Portion for the period from and including September 9, 2008, to but excluding September 22, 2008, will be added to the Cash Settlement Amount to be paid to Buyer on the Cash Settlement Date.