Thank you for your report of the response of the banks and dealers to our proposed Restructuring language.
We were quite hopeful that negotiations were proceeding within ISDA which would address our concerns about Restructuring. We are extremely disappointed to read that many banks and dealers do not now feel the definition needs changing since a number of protection sellers have continued to write CDS business with Restructuring.
We had hoped that by continuing to write new business and work within ISDA that our concerns about Restructuring would be addressed. As an interim step to account for the presence of Restructuring in many transactions, we have increased the amount of subordination we require in transactions. As the bank and dealer communities seem to have interpreted that as acceptance of Restructuring as currently defined, we have decided to suspend writing new business with the standard Restructuring language, even at the "super AAA" level. We will complete the transactions which we currently have in process.
We will continue to work with ISDA to address the problems created by the existence of Restructuring as a component of standard market contracts. As you know, we have invested significant time, money and effort into this process.
Best Regards,
Michael Schozer
Managing Director
Structured Finance and Credit Derivatives
