The Elephant in Every LME Room: CDS, Subordination and the Rules That Haven't Kept Up. An FLT Knowledge Series webinar with Sabrina Fox and Carlos Pardo.

A bond or loan position does not necessarily tell you the whole story about a creditor’s incentives.

In this Knowledge Series, Sabrina Fox and Carlos Pardo will explore the relationship between the debt being negotiated and the credit derivatives that may sit alongside it. Carlos’s argument is that understanding both can change how you read an LME negotiation, even if you never trade CDS yourself.

We’ll build the discussion step by step. First: what the contract protects, what can trigger a Credit Event and what determines the payout after one. Then: where Carlos believes modern liability management exposes tensions in the Credit Derivatives Definitions.

The examples will give each issue a practical setting. Casino and Altice Holdings open the discussion of public information and timing. Intrum brings in creditor incentives. Merlin provides a way to understand CDS preservation and orphaning. DISH takes us into asset-specific subordination and Carlos’s concern about obligations that may be “Senior In Name Only.”

We’ll also examine settlement when debt is subject to a lock-up or co-op, or replaced with a package of new debt, cash and equity. Finally, we’ll consider two different reform questions: who should decide whether a Credit Event occurred and how recovery should be valued.