May 12, 2009 / 2:38 PM / 10 years ago

Bowater CDS worth around 14 pct in initial auction

NEW YORK, May 12 (Reuters) - Credit default swaps insuring the debt of Bowater Inc are worth around 14 percent, based on the initial results of an auction to determine the contracts’ value, auction administrators Markit and Creditex said on Tuesday.

Payments on the contracts were triggered after parent AbitibiBowater Inc ABWTQ.PK, North America’s biggest newsprint maker, filed for bankruptcy protection on April 16.

The initial results indicated sellers of protection will need to pay out about 86 percent of the value of the bonds they insured, or $8.6 million per $10 million insured.

Credit default swaps are used to protect against nonpayment of debt, or to speculate on a company’s credit quality. Net volumes of around $461 million are outstanding on Bowater’s credit default swaps, according to the Depository Trust & Clearing Corp. (Reporting by Dena Aubin; Editing by Theodore d’Afflisio)

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