Bloomberg News

Fortune Brands Default Swap Traders Seek Succession Event Ruling

October 11, 2011

Oct. 11 (Bloomberg) -- The committee that governs credit- default swaps was asked to rule if Fortune Brands Inc.’s spinoff of its home and security business is a succession event.

Fortune Brands renamed itself Beam Inc. and separated Fortune Brands Home & Security Inc. on Oct. 3. The Deerfield, Illinois-based company sold its Titleist golf unit for $1.23 billion earlier this year.

The International Swaps and Derivatives Association’s determinations committee has been asked to rule if Fortune Brands had the event and if Beam is the sole successor, the New York-based association said on its website.

That occurs if an entity takes on 75 percent or more of a splitting company’s obligations that can be guaranteed by swaps. The derivatives then become linked solely to that entity, according to ISDA definitions. The committee for the Americas, made up of 15 banks and investment firms including JPMorgan Chase & Co. and D.E. Shaw Group, hasn’t yet accepted to consider the request.

Contracts protecting a net $1.19 billion of the company’s debt were outstanding as of Sept. 30, according to the Depository Trust Clearing Corp., which runs a central repository for the credit swaps market.

Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

--Editors: Pierre Paulden, Alan Goldstein

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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