LCDX: Loan Credit Default Swap Index
Wednesday, July 4th, 2007CDS IndexCo and Markit Launch Loan Credit Default Swap Index
LCDX, a Credit Derivative Index, Allows Investors to Go Long or Short U.S. Leveraged Loans
NEW YORK, NY - May 21, 2007 - CDS IndexCo LLC (”CDS IndexCo”), a consortium of 16 investment banks licensed as market makers in the ABX, CDX and CMBX indices, and Markit Group Limited (”Markit”), the leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the global financial markets, announced today the launch of LCDX, a credit default swap index referencing U.S. leveraged loans.
The index will provide investors with the ability to hedge or gain exposure to the leveraged loan market in a transparent, standardized and efficient manner. LCDX will start trading on May 22, 2007, and will trade based on the North American Loan Credit Default Swap (LCDS) contract.
LCDX comprises a basket of 100 credit default swaps referencing first-lien loans. Deliverable obligations will consist of first-lien loans as defined by Markit RED Loans in accordance with its Syndicated Secured List for North America. RED Loans confirms reference entities and the key identifying information for credit agreements, loan facilities and loan tranches.
As with the CDX and iTraxx credit derivative indices, the LCDX index will roll every six months. It will trade with a five-year coupon, and additional maturities will be added in due course. Only Failure to Pay and Bankruptcy will be treated as credit events.
Brad Levy, Managing Director, eBusiness Group at Goldman Sachs and acting Chairman of CDS IndexCo, said: “LCDX is the first widely supported Loan CDS index in North America, and its launch has been keenly anticipated by the marketplace. It will provide institutional investors with a unique tool for participating in the leveraged loan markets in an unfunded manner, and will boost the growth and liquidity of the nascent Loan CDS market.”
“Markit has worked closely with the loan dealer community to create an index that is truly tradeable and transparent,” commented Tom Price, Managing Director and Head of Loans and CDS at Markit. “We believe that LCDX will satisfy investor demand for access to U.S. leveraged loans through a liquid, synthetic product.”
Markit will act as administration, calculation, and marketing agent for LCDX, a remit which spans capturing daily price fixings; handling operations, marketing, and analytics; negotiating dealer and data licenses; and communicating information to the wider market.
The investment banks launching the index acting as market-makers are: Bank of America; Barclays Capital; Bear Stearns; BNP Paribas; Citigroup; Credit Suisse; Deutsche Bank; Goldman Sachs; JPMorgan; Lehman Brothers; Merrill Lynch; Morgan Stanley; and UBS.
For information on LCDX, see www.markit.com or contact:
CDS IndexCo
Michael Mandelbaum
Tel: +1 310 785-0810
Email: michael@mandelbaummorgan.comMarkit
Teresa Chick
Tel: +44 20 7260 2094
Email: teresa.chick@markit.com
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About CDS IndexCo
CDS IndexCo is a consortium of 16 investment banks which are licensed as market makers in the ABX, CMBX and CDX indices. The market makers include: ABN AMRO, Bank of America, Barclays Capital, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, UBS, and Wachovia.
About Markit
Markit Group Limited is the leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the global financial and commodities markets. The company receives daily data contributions from over 80 dealing firms, and its services are used by almost 1,000 institutions to enhance trading operations, reduce risk and manage compliance.
https://www.markit.com/marketing/press_releases.php?date=21May2007