DTCC puts net settlement for WaMu CDSs at $1.3 billion; Icelandic bank auctions set for next week

By Angela McDaniels

Tacoma, Wash., Oct. 27 - Depository Trust & Clearing Corp. said the net funds to be transferred from net sellers to net buyers of protection on outstanding single-name credit default swaps relating to the Washington Mutual Inc. credit event are expected to be about $1.3 billion.

The amount is based on the net notional value of outstanding single-name CDSs referencing WaMu registered in DTCC's Trade Information Warehouse. That value stood at about $2.9 billion as of Thursday, according to a DTCC news release.

Based on the Thursday credit event auction, which set a price of 57 cents on the dollar for WaMu bonds, the net funds transfer on the single-name CDSs amounts to about $1.3 billion.

DTCC said the gross notional value of outstanding single-name CDSs for WaMu registered in the warehouse stood at $41 billion as of Thursday.

WaMu is also a component in about 35 indexes serviced by the Trade Information Warehouse. DTCC said these positions will be incorporated into the net settlement requirements for buyers and sellers of protection between now and Nov. 7, the settlement date for the WaMu credit event.

At the time of settlement, DTCC will announce final net funds transfer results based on the single-name and index contracts.

Icelandic banks

The warehouse is also preparing to process the credit events for Iceland's three banks for which credit events were determined earlier this month, according to the release.

Auctions will be held on Nov. 4, Nov. 5 and Nov. 6 for Landsbanki Islands hf, Glitnir Banki hf and Kaupping Banki hf, respectively. Cash settlement for the three banks is scheduled for Nov. 20.

The gross notional value is estimated to be $19.2 billion for Landsbanki Islands, $17.5 billion for Glitnir Banki and $34.3 billion for Kaupping Banki. The net notional value is estimated at $1.8 billion for Landsbanki Islands, $2.0 billion for Glitnir Banki and $3.8 billion for Kaupping Banki.

Net fund transfer requirements between net sellers and net buyers will be determined at the conclusion of the auctions. DTCC said the maximum amount of net funds transfer will be capped by the net notional value for each bank.

DTCC is based in New York and provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. Its Trade Information Warehouse is a trade database for post-trade processing of OTC derivatives contracts.

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