Lyondell Basell is the world's third largest petrochemical group. In January Lyondell put its U.S. units into Chapter 11 bankruptcy and missed its regular coupon payment of $680 million of 2015 European bonds. It was given a 30-day grace period that ran out this week. Then all hell broke loose.
Holders of the debt, including investment banks, had to vote to decide if Lyondell was in default. They voted "yes" on Friday. Now those who sold the credit default protection must come up with payment to cover losses on Lyondell bonds.
Lyondell is buying time by being granted a 60-day restraining order to try and prevent creditors from triggering payment of the CDS contracts.
Just from this one case, you can imagine the nightmare that we could have if this happens on a widespread scale.
Do you believe the Federal Reserve can avoid this scenario here in the U.S.?
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Reader Comments (Page 1 of 1)
3-25-2009 @ 5:03PM
mike.ryan said...
So what happens to the company if the they default and CDS pay out? Does the Company Liquidate? Do the comapanies that sold the CDS take the company?