Codere Default Swaps Triggered by Failure-To-Pay Credit Event

Codere SA triggered credit-default swaps insuring $445 million of the Spanish gaming company’s debt by failing to make a timely bond payment.

The delay constituted a failure-to-pay credit event, the International Swaps & Derivatives Association said on its website, which causes settlement of all outstanding default swaps contract under the industry group’s rules.

Madrid-based Codere paid a coupon on $300 million of 9.25 percent bonds yesterday, two days after the end of a 30-day grace period. The delay followed a Sept. 13 agreement with lenders to provide 35 million euros ($47 million) in additional debt as well as amendments to terms of outstanding loans.

There were a total of 3,202 swaps contracts linked to Codere’s debt as of Sept. 13, according to the Depository Trust & Clearing Corp., which runs a central registry for the market.

The company is also included in the Markit iTraxx Crossover Index, though it may be removed when the benchmark changes this week. A new version of the current index series will most likely start trading without Codere one business day after the default swaps auction, according to BNP Paribas.

Swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

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