ISDA to publish auction terms for settlement of Masonite loan-only CDSs

By Angela McDaniels

Tacoma, Wash., Nov. 18 - The International Swaps and Derivatives Association, Inc. announced that LCDX dealers voted to hold an auction for loan-only credit derivative swaps transactions referencing Masonite International Corp., which is a constituent of the Markit LCDX index.

The auction terms will set out a settlement mechanism similar to that used to settle recent credit events, including Lehman Brothers Holdings Inc. and Washington Mutual, Inc. Unlike those credit events, the auction mechanism is already built into ISDA's standard loan-only CDS documentation, according to an ISDA news release.

ISDA said this is the second time the auction has been used to settle loan-only CDS contracts, the first being Movie Gallery Inc. in October 2007.

The auction will be administered by Markit and Creditex.

The auction terms, including the auction date, will be determined by the LCDX dealers according to the LCDS Auction Rules published on ISDA's website, www.isda.org.

Masonite International is a door manufacturer based in Mississauga, Ont. Its U.S. headquarters are located in Tampa, Fla.

ISDA is based in New York and represents participants in the privately negotiated derivatives industry.

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