Novo Banco S.A.

We refer to senior credit derivative transactions referencing Novo Banco, S.A. (the \"Reference Entity\") incorporating the Updated 2003 Definitions (the \"Affected Transactions\").

We understand that the current Markit RED obligation for these transactions is XS0772553037 (the \"Current Markit RED\").  The prior Markit RED obligation was PTBEQKOM0019 (the \"Prior Markit RED\").  The Prior Markit RED ceased to be an obligation of the Reference Entity on 29 December 2015 (the \"Transfer Date\") when it was moved from the Reference Entity to its current issuer (Banco Espírito Santo S.A.).  Note that there has not been a DC Resolution for the purposes of Section 2.30 of the Updated 2003 Definitions to identify the appropriate Substitute Reference Obligation thereunder.  However, the Current Markit RED was identified as the replacement Standard Reference Obligation for the Senior Level for the purposes of credit derivative transactions incorporating the 2014 Definitions.

Early in 2016, Markit replaced the Prior Markit RED with the Current Markit RED.  On 26 May 2016, DTCC facilitated an auto-adherence update run to move Affected Transactions from the Prior Markit RED to the Current Markit RED.  This was limited to Affected Transactions with a Trade Date prior to the Transfer Date.  We understand that this update was completed by a significant majority of the eligible transactions in DTCC.  There is a distinct population of Affected Transactions remaining outstanding with a Trade Date on or after the Transfer Date and which were confirmed with the Prior Markit RED as the Reference Obligation.

Accordingly, for the purposes of Affected Transactions which were confirmed with the Prior Markit RED as the Reference Obligation:

(a)    is there an obligation for the Calculation Agent to identify a Substitute Reference Obligation pursuant to Section 2.30(a)(ii)(C) of the Updated 2003 Definitions, irrespective of whether the Trade Date is before or after the Transfer Date; and
(b)    if so, is the Current Markit RED the Substitute Reference Obligation for such Affected Transactions?

Section 3.6(b)(i) of the DC Rules specifically empowers a Convened DC to determine these matters.  Further and notwithstanding this specific power, Section 3.8(b) of the DC Rules permits a Convened DC to pass a DC Resolution in respect of any matters of contractual interpretation relevant to the credit derivatives market generally.  In particular, there remains some uncertainty in the market as to the appropriate contractual interpretation of Section 2.30(a)(ii)(C) of the Updated 2003 Definitions with respect to Affected Transactions specifying the Prior Markit RED and executed on or after the time of transfer of the Prior Reference Obligation.