The auction determining the recovery rate for Calpine Corp. index trades set a recovery value of 19.125%, much lower than the 63.375% recovery value for Delphi Corp. The rate reflects the low estimated value of the assets that back the bonds, said analysts.
Another reason for the low recovery rate is the fact that there was no short squeeze on Calpine bonds as was the case with Delphi. Delphi's bonds traded up in the days running up to the auction. This was partly driven by the gap between the large amount of CDS contracts and the number of Delphi bonds. Calpine, by comparison, has more bonds outstanding than CDS exposure, according to analysts.