Parmalat Self-Referenced CDS Purchase Raises Ethical Question

  • 22 Dec 2003
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The revelation that distressed Italian dairy producer Parmalat Finanziaria had purchased self-referenced credit-default swaps has provoked debate on the ethics behind corporates selling protection on their own name. By purchasing self-referenced default swaps corporates dive into a sticky ethical and legal situation, said derivatives pros. Parmalat, which has come under the microscope for having purchased self-referenced default swaps in 1999, became distressed after it failed to pay back principal on a bond and had its rating slashed to CC.

Critics charge that creditors of corporations are not always made aware that of the nature of the credit-default swaps. Although swaps may appear to creditors as high quality assets they can lose as much as 50% of their value quickly in the case of default, a fact which isn't always made transparent, explained one attorney. As corporations become distressed, and the swaps subsequently blow out, corporations also need to pledge more collateral against the swaps, which in turn can provoke a vicious cycle contributing to even further widening, added another derivatives pro. Legal issues also complicate self-referenced derivatives, with defaults being subject to attack under the anti-forfeiture bankruptcy code, added the attorney.

  • 22 Dec 2003

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 358,996.09 1352 9.05%
2 JPMorgan 321,264.04 1464 8.10%
3 Bank of America Merrill Lynch 318,428.16 1105 8.03%
4 Goldman Sachs 237,263.73 791 5.98%
5 Barclays 231,619.97 897 5.84%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
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1 HSBC 35,007.57 165 6.53%
2 Deutsche Bank 34,880.53 120 6.51%
3 Bank of America Merrill Lynch 31,805.65 97 5.93%
4 BNP Paribas 27,920.60 169 5.21%
5 SG Corporate & Investment Banking 24,398.89 138 4.55%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
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1 JPMorgan 19,745.92 80 8.85%
2 Morgan Stanley 16,334.63 83 7.32%
3 Citi 15,972.34 95 7.16%
4 UBS 15,487.17 60 6.94%
5 Goldman Sachs 14,053.61 76 6.30%