Idearc LCDS Auction

The Idearc Inc. LCDS Auction relates to settlement issues concerning Idearc Inc. (“Idearc”), a Dallas-based phone-directory publisher which announced on March 31 that it had filed voluntary petitions to reorganize under Chapter 11 of the US Bankruptcy Code. Idearc is included in the LCDX credit derivative index and is the subject of single-name loan CDS trades.

Cash settlement at the final price determined by an auction is contemplated by each of the standard documents for North American loan credit default swaps that were published by ISDA and CDS IndexCo LLC in 2007 1. These documents provide that if an auction is held in respect of the reference entity and designated priority of loan referenced by the relevant transaction, then settlement of that transaction will be subject to the terms of that auction.

The circumstances in which an auction will be held are governed by the LCDS Auction Rules published by ISDA and CDS IndexCo on May 22, 2007. Pursuant to these rules, the Eligible LCDX Members voted to hold an auction in respect of Idearc First Lien Loans. The terms of this auction are contained in the LCDS Auction Settlement Terms for Idearc (the “Auction Terms”), which were published by ISDA and CDS IndexCo on April 17, 2009.

This auction is scheduled for Thursday April 23, 2009. Markit Group Limited and Creditex Securities Corp. will administer the auction. The cash settlement date for Covered Transactions (as defined in the Auction Terms) will be May 1, 2009.

In order to ensure that a transaction is brought within the Auction Terms, parties must have delivered a credit event notice and notice of publicly available information (or entered into a settlement agreement deeming these notices to be delivered) effective on or prior to the auction date. It should be noted that there is no requirement for the parties to adhere to a protocol in order for a transaction to be covered by the Auction Terms.

 

1. These documents include the Syndicated Secured Loan Credit Default Swap Standard Terms Supplement published by ISDA on May 22, 2007, the LCDX Untranched Transactions Standard Terms Supplement published by ISDA and CDS IndexCo on May 22, 2007 and the LCDX Tranche Transactions Standard Terms Supplement published by ISDA and CDS IndexCo on September 25, 2007. Parties should note for this purpose that any single-name loan CDS transactions documented under the June 8, 2006 version of the Syndicated Secured Loan Credit Default Swap Standard Terms Supplement will have been updated to the 2007 form if both parties adhered to the ISDA LCDS Protocol.