Event Publicly Available Information:
Has a Failure to Pay Credit Event occurred with respect to HEMA Bondco I B.V.?
The Eligible Market Participant that submitted the DC Question included the following information:
Bloomberg News Article (available via Bloomberg Terminal): "Moody’s appends limited default (LD) designation to Hema’s PDR after payment default"
The EMEA DC has determined that a Failure to Pay Credit Event has occurred with respect to HEMA Bondco I B.V. .
|Auction Settlement Terms||
DC Statement in respect of Final Auction Settlement Terms
The Auction Settlement Terms in respect of HEMA Bondco I B.V. have been amended to facilitate the efficient operation of the Auction and settlement of the Representative Auction-Settled Transactions.
When the CDS market moved towards Auction Settlement as the standard form of settlement rather than Physical Settlement, one of the guiding principles was that, so far as possible, market participants should not be prejudiced by the change. So, for example, it would be unfair if there are good Deliverable Obligations that survive the occurrence of the relevant Credit Event – and so the CDS trade could have been immediately physically settled – but these obligations have been impaired in some way by the time the Auction takes place (such that they cease to be Deliverable Obligations). The DC may seek to avoid this prejudice by making appropriate amendments to the Auction Settlement Terms. This approach is provided for in Section 3.2(d) of the DC Rules and is discussed in more detail in the EMEA DC Explanatory Statement in respect of Steinhoff Europe AG (dated 13 September 2019).
In relation to HEMA Bondco I B.V., the debt is currently going through an English Scheme of Arrangement process and so the DC resolved to apply the principle set out in Section 3.2(d) of the DC Rules. The DC has resolved to include the 2022 Senior Secured Notes of the Reference Entity on the Final List, notwithstanding any contingencies that may now exist under the Scheme, on the basis that had Physical Settlement applied, a protection buyer that was holding non-locked up 2022 Senior Secured Notes could have delivered such debt in settlement of a CDS transaction prior to any such contingencies being introduced. Similarly, the DC has reserved the ability to supplement the Auction Settlement Terms to address settlement of the Representative Auction-Settled Transactions to the extent that the on-going Scheme of Arrangement process is completed during the Physical Settlement Period.
The timelines for settlement of Representative Auction-Settled Transactions has also been adjusted in light of the on-going Scheme of Arrangement process.
Note that the Auction Settlement Terms will only apply to Transactions that specify as the Reference Obligation (i) the Senior Secured Notes due 2022 of the Reference Entity (ISINs: XS1647643466 (Rule 144A) and XS1647643110 (Regulation S)); (ii) the €250,000,000 Senior Secured Floating Rate Notes due 2019 issued by the Reference Entity (ISINs: XS1075852571 (Rule 144A) and XS1075799319 (Regulation S); or (iii) the €315,000,000 6.25% Senior Secured Fixed Rate Notes due 2019 issued by the Reference Entity (ISINs: XS1075853207 (Rule 144A) and XS1075833860 (Regulation S). If a Transaction does not specify one of these obligations as the Reference Obligation then it will not be covered by the Auction Settlement Terms (unless the parties bilaterally agree otherwise). Accordingly, such Transactions will fall back to Physical Settlement.
Event Determination Date: 18 August 2020
12:00 pm London time on Monday 7 September 2020: deadline for any market participant who wishes to participate in the HEMA Bondco I B.V. Auction to submit a Participating Bidder Letter to the DC Secretary. Please contact the DC Secretary as soon as possible (and in any event ahead of the deadline) for further details.
5.00 pm London time on Monday 7 September 2020: deadline for submission of Customer Physical Settlement Requests to the relevant Participating Bidder.
Tuesday 8 September 2020: Auction Date.
4.00pm London time on Wednesday 9 September 2020: deadline for Buyers to deliver Notices of Physical Settlement to Sellers in respect of any Representative Auction–Settled Transactions.
Friday 11 September 2020: Auction Settlement Date.
4.00pm London time on 14 September 2020: deadline for Sellers to deliver Notices of Physical Settlement to Buyers in respect of any Representative Auction–Settled Transactions.
Monday 28 September 2020: Physical Settlement Date in respect of any Representative Auction–Settled Transactions.