Correlation rise stokes mezz rally but adds to CSO woes
Below the calm surface of the credit market, correlation has been churning and creating dislocations rich with reward for index tranche traders but complicating bespoke issuance, say sources.

Rising idiosyncratic risk leads to calls for high yield index tranche fix from traders
As sources of funding dry up for the weakest borrowers in the credit market, some correlation traders are calling for an overhaul of CDX NA HY index tranches to make trades on wide-end dispersion more effective.

Thomas Cook CDS auction sets initial midpoint at nine cents
An auction to settle CDS referencing Thomas Cook Group has derived an initial market midpoint of 9.125 cents, implying protection buyers will receive a pay-out on contracts in the region of 89 cents

Thomas Cook is a lesson for CLOs on unsecured bonds, says TwentyFour AM
The liquidation of UK travel operator Thomas Cook this week has underscored that “unsecured debt has no place in CLOs,” according to a note by Aza Teeuwen, portfolio manager at TwentyFour Asset Management

Galapagos failure-to-pay credit event posed to DC as bond grace period lapses
The Credit Derivatives Determinations Committee has accepted a request to rule on whether Galapagos Holding, a former iTraxx Crossover index constituent, has triggered a failure-to-pay credit event

Steinhoff CDS auction in limbo due to lock-up and CVA
A date to settle CDS referencing Steinhoff Europe had still to be agreed as Creditflux went to press — more than a month on from when the EMEA Determinations Committee (DC) ruled that the company had triggered a failure-to-pay credit event.

Direct lenders split over best way to manage loan restructuring
Direct lenders are divided on how best to set up internally when dealing with loans that require restructuring. Some managers argue that a deal should be restructured via the original deal team

Strengthen CDS definitions to stop engineered defaults, say lawyers
The likelihood of stamping out manipulation in the credit default swaps market – namely the practice of staging credit events – is remote, say market sources

Investors nod through wind up of 1.0 euro CLOs
CLOs may have weathered the storm of the financial crisis far better than other structured products, but the tally of CLO defaults is quietly growing