ISDA to publish auction terms for settlement of Hawaiian Telcom loan-only CDSs

By Angela McDaniels

Tacoma, Wash., Dec. 1 - The International Swaps and Derivatives Association, Inc. announced that LCDX dealers voted to hold an auction for loan-only credit default swap transactions referencing Hawaiian Telcom Communications, Inc., which filed for Chapter 11 bankruptcy protection on Monday.

The auction terms will set out a settlement mechanism similar to that used to settle recent credit events, including Lehman Brothers Holdings Inc. and Washington Mutual, Inc. But unlike those credit events, the auction mechanism is already built into ISDA's standard loan-only CDS documentation, according to an ISDA news release.

This will be the third time the auction has been used to settle loan-only CDS contracts, the first being Movie Gallery Inc. in October 2007 and the second being Masonite International Corp., the auction for which is scheduled for Dec. 9.

The auction for Hawaiian Telcom will be administered by Markit and Creditex.

Markit noted that the company is a constituent of LCDX series 8, 9 and 10 and that the designated priority of the underlying obligations of Hawaiian Telcom is first lien.

The auction terms, including the auction date, will be determined by the LCDX dealers according to the LCDS Auction Rules published on ISDA's web site, www.isda.org.

Hawaiian Telcom is a telecommunications company based in Honolulu.

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