Sectors > Top Reports > Selecta Memo 100920

Selecta Memo 100920

Selecta. CDS – Will CDS Trigger, Under Which Credit Event, When & Will Existing SSNs Or New 1st or 2nd Lien Opco SSNs Be Deliverable? SSNs vs CDS – How Does Risk-Reward Compare?
PUBLISHED: 10 September 2020
SUBMARKET: Selecta, Top Reports, Top Reports,


Why Read

  • Understand why we think selling Selecta’s 5 year CDS offers a pay-off profile of “make 27 points or 3 points to risk losing 1 point”. Expected gain c. 10 points in the next 2 months

Questions Answered

  • Will Selecta’s proposed restructuring via a UK scheme trigger a CDS credit event? Bankruptcy or restructuring credit event?
  • Could a failure to pay credit event occur if the scheme is not implemented?
  • When would the Credit Event Resolution Request Date be and what does this mean for timing of any CDS auction, dependent on whether we get a bankruptcy or a restructuring credit event?
  • Would Selecta’s Existing SSNs (lower priced) be deliverable at the time any CDS auction is held or would the Deliverable Obligations at that time only be the (higher priced) New 1st Lien Opco SSNs?
  • Could the New 2nd Lien Opco SSNs be deliverable into CDS?
  • What are our estimated probabilities for each CDS scenario?
  • How does the risk-reward compare on being long risk through Selecta’s Existing SSNs vs being long risk through selling Selecta 5 year CDS?
  • How sensitive is recovery on Selecta’s Existing SSNs to yields on the New 1st and 2nd Lien Opco SSNs?
  • What yields and prices for the New 1st and 2nd Lien Opco SSNs are implied by the current market price on the Existing SSNs?
  • Does the lock-up agreement create any issues in terms of CDS deliverability?
  • What lessons can we draw from past ISDA Determinations Committee credit event determinations following restructuring via UK schemes of arrangement? Case studies from Matalan, Hema and Thomas Cook


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