ISDA Publishes ISDA 2014 Credit Derivatives Definitions

The International Swaps and Derivatives Association ("ISDA") announced the publication of the 2014 ISDA Credit Derivatives Definitions, which revises the 2003 ISDA Credit Derivatives Definitions that contains the basic terms used in the documentation of most credit derivatives transactions. The 2014 ISDA Credit Derivatives Definitions introduce several new terms, including:

• bail-in/financial terms for credit default swap ("CDS") contracts on financial reference entities: incorporates a new credit event triggered by a government-initiated bail-in and a provision for delivery of the proceeds of bailed-in debt or a restructured reference obligation, and more delineation between senior and subordinated CDS;
• sovereign CDS asset package delivery for CDS contracts on sovereign reference entities: introduces the ability to settle a credit event by delivery of assets into which sovereign debt is converted; and
• standard reference obligation: allows for the adoption of a standardized reference obligation across all market-standard CDS contracts on the same reference entity and seniority level.

Additionally, the 2014 ISDA Credit Derivatives Definitions contains several amendments to standard credit derivatives trading terms, including: upgrading provisions dealing with transfers of debt to successor reference entities; expanding the scope of guarantees that can be hedged with CDS; rationalizing the treatment of contingent debt and guarantee obligations; addressing currency redenomination issues; and adjustments to the restructuring settlement mechanism.

See: Press Release.