Feb. 2 (Bloomberg) -- Sellers of default insurance on Northern Rock Asset Management Plc may have to pay as much as 1.5 cents on the euro to settle contracts linked to the lender’s debt.
Credit-default swaps traders set initial recovery values in auctions of 99.25 percent and 98.5 percent, according to administrators Markit Group Ltd. and Creditex Group Inc. There were two results because of the different maturities of notes being auctioned.
Northern Rock Asset Management’s swaps are being settled because the company triggered a so-called restructuring credit event when it bought back subordinated bonds last year. The lender modified conditions on the bonds, allowing it to buy all remaining securities not tendered by investors.
Northern Rock Asset Management said Dec. 15 that it was purchasing notes denominated in pounds and dollars with a face value of about 889 million pounds ($1.4 billion).
There were 425 outstanding swaps contracts insuring a net $142 million of the company’s debt as of Jan. 27, according to data from the Depository Trust & Clearing Corp., which runs a central registry for the market.
Final values from today’s auctions will be set at 3:30 p.m. in London.
--Editors: Michael Shanahan, Paul Armstrong
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