Novo Banco And CDS – A Post-Mortem

In 2014, the International Swaps and Derivatives Association, Inc. ("ISDA"), published the 2014 ISDA Credit Derivatives Definitions (the "Definitions"), which updated the 2003 ISDA Credit Derivatives Definitions.¹

One of the most significant changes in the Definitions was the inclusion of a new credit event for "Governmental Intervention."²  This credit event was intended to address concerns expressed in the market that the credit event for "Restructuring" may not cover certain measures actually taken by governments to support struggling entities, especially banks.  Governmental Intervention³ is generally defined to include actions or announcements by a "Governmental Authority"⁴ that result in, inter alia, the reduction in the rate or amount of interest payable by a reference entity, an expropriation or other event which mandatorily changes the beneficial holder of the relevant obligation, or a mandatory cancellation, conversion or exchange.  This event is similar