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They Left It Late

21 June 2016 by lberuti

Oi eventually filed for bankruptcy protection on Monday in Brazil after it failed to reach a deal with its creditors over $19Bln in debts. The petition in a Rio de Janeiro Court from the fourth biggest mobile provider and six subsidiaries (including PORTEL – Portugal Telecom International Finance BV – which is the entity referenced by CDS) came after its chief executive quit 10 days ago and talks with creditors ground to a halt ahead of a 231MEuros payment for a euro denominated bond in about a month. As shown by the above grapple, a credit event on PORTEL has never really been in doubt given the very distressed level of the 5 year risk premium over the last quarter, but the timing will make for interesting discussions at the ISDA Decision Committee, which ultimately rules on which contracts effectively protect against the default. A number of CDS (and many indices among them as PORTEL was a popular name in old series of iTraxx Main and iTraxx Crossover) were maturing on the 20th June 2016, the very same day Oi decided to file.