DTCC Connection

Oct 01, 2010 • DTCC Connection

What is a Restructuring?

Credit event restructurings usually occur, or are “triggered,” when the terms of the debt obligation become less favorable to the debt holder.

Such restructurings can result in a reduction in the interest payment or the principal amount of a bond, the extension of a maturity date or the subordination of a bond to another obligation. As with all other credit events, restructurings affect the credit default swap (CDS) contracts written on the underlying bond, which means the derivatives contracts require processing to ensure the modifications are reflected in them.