CDS owners sometimes profit from wrecking reorganizations

06/22/2009 | Economist (free content), The

The spreading use of credit default swaps is bringing about some peculiar behavior in bankruptcy proceedings, as well as during out-of-court efforts to avert bankruptcy, according to this article. Lenders who have made heavy use of CDS to hedge their credit risk can sometimes end up with more money from collection on their CDS than by participating in a successful restructuring.

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Economist (free content), The

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