Credit default swaps, which are being scrutinised for their possible role in several Chapter 11 bankruptcy protection filings, including those of AbitibiBowater, General Growth Properties and General Motors, are complicating debt restructurings that are using bond exchange offers.
“Every time an exchange offer fails or there is a low participation rate, it is because of the CDS,” says one financier at Citigroup who has worked on such offers.
