2009 LyondellBasell Industries CDS Protocol

The 2009 LyondellBasell Industries CDS Protocol (the “Protocol”) relates to settlement issues concerning the credit derivatives trades referencing LyondellBasell Industries AF SCA, the Netherlands-based petrochemicals producer.  LyondellBasell Industries AF SCA was reported to have failed to pay interest on $679 million of bonds maturing in 2015. The company missed a payment due on February 15 and a 30-day grace period expired on March 19.

The purpose of the Protocol is to offer market participants an efficient way to address the settlement issues relating to credit derivative transactions referencing LyondellBasell. The Protocol will offer institutions the ability to amend their documentation for various credit derivatives transactions in order to utilize an auction scheduled for April 16, 2009 to determine the final price for certain LyondellBasell bonds. Markit Group Limited and Creditex Securities Corp. will administer the auction.

The 2009 LyondellBasell Industries CDS Protocol is open to ISDA members and non-members. The Protocol will be open between Monday April 6, 2009 and Thursday April 9, 2009.


The following documents must be submitted via email to the ISDA office in New York in order to adhere to the 2009 LyondellBasell Industries 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.  Click here for example of conformed copy.

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

Click here for the form of Adherence Letter.

Please submit all Adherence Letters via email to LyondellBasellProtocol@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 2009 LyondellBasell Industries 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 Monday April 6, 2009.

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 2009 LyondellBasell Industries 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 2009 LyondellBasell CDS Protocol.

Frequently Asked Questions

ISDA has prepared this brief summary of frequently asked questions to assist in your consideration of the 2009 LyondellBasell Industries CDS Protocol (the “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 LyondellBasell CDS Protocol; and (iii) questions relating to the substance of the LyondellBasell CDS Protocol itself.

Adherence Letter Submission Process
When do I need to send in my Adherence Letter? 
The Protocol is open between 9:00 a.m. New York Time on Monday April 6, and 5:00 p.m. New York Time on Thursday April 9, 2009. Any entity must email its Adherence Letter to ISDA by 5:00 p.m. New York Time on Thursday April 9, 2009, or it will not be able to participate in the Protocol.

How do I send in my Adherence Letter?
All Adherence Letters must be delivered by email to LyondellBasellProtocol@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 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 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 LyondellBasell Industries CDS 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 2009 LyondellBasell CDS Protocol. You may obtain a copy of the form Adherence Letter by visiting the ISDA website, www.isda.org and clicking on “2009 LyondellBasell 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 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 the Protocol, then you must bilaterally settle each of your trade(s) with each of your counterparties as such trade(s) relate to LyondellBasell. 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 Protocol.

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

Does adhering to the Protocol affect other credit derivative transactions?
Yes. In addition to single and index credit derivative transactions referencing LyondellBasell, the following transactions are also covered in the 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 Protocol?
Reference Obligation Only Transactions, Loan Only Transactions, Preferred CDS Transactions and Fixed Recovery Transactions are not covered under the Protocol. Subordinated CDS transactions are also not covered under the 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 April 16, 2009. 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. London 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 EUR, how is the FX calculated?
All Physical Settlement Requests and Limit Order Submissions are denominated in EUR; 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-EUR Deliverable Obligation may be delivered is determined by the Calculation Agent using the Currency Rate  (as defined in the 2003 ISDA Credit Derivatives Definitions) 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 is expected to be April 23, 2009.

How are accruals calculated?
Accruals will be dealt with in accordance with the 2003 ISDA Credit Derivatives Definitions.  The Seller will be required to deduct the accrued amount from the Cash Settlement Amount payable on the Cash Settlement Date, expected to be April 23, 200. Accrued amounts will be calculated up to and including the Event Determination Date, which is March 23, 2009.