Thomas Cook’s Rescue Tests Reputation of Default Protection

Thomas Cook’s Rescue Tests Reputation of Default Protection

Bloomber’sstory emphasizes the peculiar situation of Thomas Cooks default swaps. There is a real possibility for the CDS holders to get unpaid, even though Thomas Cook is close to a default. This is due to a specific technicality, where the restructuring of the group is done through cross-border resolution. As a result, the default swap’s performance may be substantially  impacted by a technicality, not by substance.

“Buying insurance against a default and then being unable to claim when the company does actually default defeats the point of having it,” said Henry Craik-White a portfolio manager at Wells Fargo Asset Management in London. “It makes a mockery of the product.”

Deriveum is specially designed to settle clearly outside of the Resolution mechanism, therefore when parties use it to back their deals the contract will execute with complete certainty.

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