Credit default swaps cited as "significant factor" in bankruptcies

04/17/2009 | Financial Times (free content)

Credit default swaps are being blamed as a factor in the bankruptcy filings of AbitibiBowater, a newsprint producer, and General Growth Properties, a mall owner. Speaking generally about bankruptcy filings, Alan Kornberg of Paul, Weiss, Rifkind, Wharton & Rice said the firm has seen the derivatives become a "significant factor" when negotiations related to out-of-court restructurings do not work. "We used to talk about the practice theoretically, but now we see cases where it is hard to get lenders to agree to tender or to compromise and then you find out that these holdouts had significant CDS protection," Kornberg said.

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