A total of 323 parties signed up to the Calpine credit default swap protocol designed by the International Swaps and Derivatives Association to cash settle CDS index trades. Parties had until last Thursday to sign up to the program. An auction will be held tomorrow to determine a final settlement price.
The number of adherents was significantly smaller than the 571 that signed up to the Delphi CDS protocol. A spokeswoman for ISDA said that fewer signed up to the protocol because the association allowed investment managers to sign up, rather than requiring individual funds within an investment management firm to adhere. The spokeswoman said that based on the number of entities within each fund that signed up to the Delphi protocol, the truer number of adherents would have been closer to 500 had the association required individual funds to sign up.
A source familiar with the protocol said that Calpine may also have fewer adherents because it is a less liquid name than Delphi. "Calpine was no way as near as big an event as Delphi," he said. He added that in comparison to Delphi, Calpine is less prevalent in collateralized debt obligations. "Calpine was not as popular in CDOs. The name was not as liquid."
The Calpine protocol also excludes Calpine's 7.75% '15 convertible notes an aspect that may have discouraged parties that own these bonds from participating in the protocol, said the source. The protocol explicitly excluded these bonds because they contain unusual provisions that make them subordinate to senior unsecured debt.