The DC Secretary has received confirmation that the conditions precedent to the resolutions passed by the EMEA DC on Friday 2 October 2015 (EMEA DC Decision 02102015) have been satisfied. Therefore, pursuant to EMEA DC Decision 02102015, the resolutions listed in EMEA DC Decision 05102015, which were published earlier today 5 October 2015 are effective.
For background information on this event, please refer to the EMEA DC’s meeting statements in relation to Issue No. 2015091701, which can be accessed here.
Pursuant to the resolutions published today 5 October 2015 (EMEA DC Decision 05102015) and in relation to the publication of the Auction Settlement Terms and the Final List of Deliverable Obligations, market participants should note the following points:
Auction Settlement Terms
In comparison with the Auction Settlement Terms for the most recent EMEA DC Auction (Codere), please note that the material changes to the Auction Settlement Terms for The Republic of Ukraine include:
(i) The Auction Settlement Terms have been updated for use with the 2014 ISDA Credit Derivatives Definitions (the 2014 Definitions).
(ii) The Auction Settlement Terms have been amended to cover transactions incorporating the 2003 ISDA Credit Derivatives Definitions (as supplemented by the March 2009 Supplement or the July 2009 Supplement) ("Updated 2003 Transactions") as well as those transactions incorporating the 2014 ISDA Credit Derivatives Definitions. Whilst this change has been made for Republic of Ukraine Auction, future Auction Settlement Terms will not necessarily cover Updated 2003 Transactions.
(iii) For both Updated 2003 Transactions and 2014 Transactions to be Auction Covered Transactions, amongst other requirements, the Deliverable Obligation Provisions applicable to such transactions need to be identical to one set of the Deliverable Obligation Terms specified in Schedule 1 of the Auction Settlement Terms. This means that, for example, if an Updated 2003 Transaction or 2014 Transaction specifies "Bond or Loan" as the Deliverable Obligation Category, such transaction will not constitute an Auction Covered Transaction.
(iv) Subject to (iii) above, Updated 2003 Transactions and 2014 Transactions with a Scheduled Termination Date of 20 September 2015 are expected to constitute Auction Covered Transactions by virtue of the DC Resolution of 23 September 2015 that a Potential Repudiation/Moratorium occurred with respect to the Republic of Ukraine on 19 September 2015. Please note, however, that any such Auction Covered Transaction will not be subject to the Fixed Rate Accrual Amendments set out at Schedule 2 of the Auction Settlement Terms on the basis that the final Fixed Amount under such transaction should have been paid by Buyer on or about 20 September 2015.
Timeline and Settlement Provisions
(i) Any customer that wishes to submit a Customer Physical Settlement Request to a Participating Bidder must submit a Customer Physical Settlement Request Letter (the form of which is attached as Exhibit 2 to the Auction Settlement Terms) to the relevant Participating Bidder no later than 5:00 p.m. London time on Monday 5 October 2015.
(ii) The Physical Settlement Period for Representative Auction-Settled Transactions (i.e. transactions that are created pursuant to the Auction) ("RASTs") has been shortened to one Business Day following the Notice of Physical Settlement Date (which is Wednesday 7 October 2015). That is, settlement of all RASTs would be required to be completed on or before Thursday 8 October 2015.
(iii) Accordingly, to ensure that each Participating Bidder in a RAST settlement chain is aware of which Bonds it will receive under the Customer Buy RAST / Auction RAST in respect of which it is Seller so that it can then specify the same Bonds in the Notice of Physical Settlement that it delivers to Seller under the Auction RAST / Customer Buy RAST in the same RAST settlement chain in respect of which it is Buyer, the deadline for Buyers to deliver Notices of Physical Settlement (or NOPS Amendment Notices) has been shortened as set out below:
(a) Customer Buy RAST, 10:00 a.m. London time on Wednesday 7 October 2015;
(b) Auction RAST, 12:00 p.m. London time on Wednesday 7 October 2015; and
(c) Customer Sell RAST, 2:00 p.m. London time on Wednesday 7 October 2015.
(iv) If (a) Buyer fails to deliver an effective Notice of Physical Settlement by the relevant deadline specified above or (b) Buyer has not delivered the Bonds specified in the relevant Notice of Physical Settlement (or NOPS Amendment Notice) on or before Thursday 8 October 2015, Seller will have three Business Days to try and buy in any Bonds on the Final List (as selected by the Seller in its sole discretion), during which time Buyer’s right to deliver the Bonds specified in the relevant Notice of Physical Settlement (or NOPS Amendment Notice) will be suspended.
(v) If Seller is unable to buy in any Bonds on the Final List by the end of the initial three Business Day buy-in period, then the RAST settlement provisions revert to the normal procedures set out in Section 9.7 of the 2014 Definitions. That is, Buyer’s right to deliver the Bonds specified in the relevant Notice of Physical Settlement (or NOPS Amendment Notice) would be reinstated, subject to Seller’s ability to suspend that right once again six Business Days after the end of the initial buy-in period if Seller is of the view that he can effect a buy-in (with this process repeating after the subsequent buy-in period until final settlement of the RAST trade).
(vi) Buyers under RASTs should note that by delivering a Notice of Physical Settlement (or NOPS Amendment Notice), they are deemed to represent that (i) they hold, or have a reasonable expectation of receiving, the relevant amount of each Bond specified therein, and (ii) accordingly they will be able to deliver such amount of each such Bond on or before Thursday 8 October 2015.
(vii) Please note the following additional points in relation to these amended RAST settlement/termination provisions:
(a) Unlike the normal buy-in procedures, Seller will be able to buy in any Bonds on the Final List whereas Buyer can only deliver the Bonds specified in the relevant Notice of Physical Settlement (or NOPS Amendment Notice);
(b) In seeking buy-in offers, Seller is only under an obligation to obtain firm tradeable quotations and need not commit actually to purchase the relevant Bonds. Additionally, any buy-in offers that Seller seeks to obtain on Friday 9 October 2015 must be on the basis of same day settlement of such purchase. This is consistent with the EMEA DC’s intention of running an Auction on an expedited basis so that the ultimate recipients of Bonds delivered under RASTs may participate in Ukraine’s exchange offer and consent solicitation.
(c) If the buy-in provisions are applicable because Buyer has failed to deliver a Notice of Physical Settlement, Seller may deliver a Notice of Physical Settlement on Buyer’s behalf during the Seller’s initial three Business Day buy-in period. If Seller does not deliver a Notice of Physical Settlement and is unable to effect a buy-in within the initial 3 Business Day buy-in period, then the RAST will terminate on such third Business Day; and
(d) If all Bonds on the Final List are redeemed, exchanged or the aggregate amount thereunder is otherwise reduced to zero, in all cases prior to settlement, the RAST will terminate.
(viii) Any dealer wishing to participate in the Auction as a participating bidder should note that the cut-off time to submit a Participating Bidder Letter (a form of which is attached as Exhibit 1 to the Auction Settlement Terms and a Word version of which can be accessed at the link above) is 11:00 a.m. London time on Monday 5 October 2015. Please note the revised representations that potential Participating Bidders are to give.
(ix) If, for whatever reason, an Auction Final Price is not determined on or before Wednesday 7 October 2015, such date will constitute an Auction Cancellation Date. The consequence of this is that each Auction Covered Transaction will settle in accordance with its fallback settlement method. In accordance with Section 13(e) of the Auction Settlement Terms, ISDA, Markit and Creditex will announce the occurrence of an Auction Cancellation Date on each of their websites.
Common Event Determination Date: Monday, October 5, 2015
|Auction Settlement Terms|
|List of Participating Bidders|