(Updates with ISDA ruling)
By Helen Bartholomew and Robert Smith
LONDON, Nov 26 (IFR) - ISDA’s credit determinations committee has ruled that recent events at Abengoa do not constitute a bankruptcy credit event.
The anonymous general interest question was submitted to ISDA’s committee on Wednesday, citing Abengoa’s announcement that it would file for creditor protection after a deal to secure 350m in funding from a white knight investor fell through.
The 15-strong committee, comprising 10 sell-side and five buy-side firms, convened at 1200 GMT today. It unanimously ruled that Abengoa’s intention to seek protection under Article 5bis of the Spanish insolvency law did not constitute a credit event.
The committee noted that a further question could be submitted if new information becomes available. A ruling in favour of a credit event would trigger payouts on US$718m notional outstanding of credit default swaps.
Abengoa is striving to reach an agreement with creditors to avoid a full insolvency process and under Spanish law, has four months to reach an agreement with investors.
But with a number of debt maturities - including commercial paper - before year-end, the issuer could still be pushed into technical default before a restructuring agreement is put in place.
The cost of five year protection on the name surged following the filing and the instruments are now bid at 83% upfront, meaning that it costs US$8.3m to insure US$10m notional of debt plus a 500bp running coupon. (Reporting by Robert Smith)