the visible hand

it is the theory which decides what can be observed – einstein

CDS Blamed For Corporate Bankruptcies

Posted by ecoshift on May 9, 2009

CDS Blamed For Corporate Bankruptcies
The AIG Bailout Is Pushing Other Companies Into Bankruptcy
Joe Weisenthal|Apr. 17, 2009, 8:14 AM|

This week, mall operator General Growth Partners (GGP) and newsprint maker AbitibiBowater both filed for bankruptcy, after failing to persuade bondholders to restructure voluntarily.

Now lawyers involved in these bankruptcy proceedings tell the Financial Times that the credit default swaps are the problem — mainly, bondholders who have purchased CDS on this debt have little incentive to negotiate or play ball, since the CDS, if the counterparty honors the agreement, makes them whole.

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