Swaps Play Growing Role In Restructurings

Law360, New York (June 19, 2009, 12:00 AM EDT) -- Already loaded down with much of the blame for wreaking havoc on the global financial system, credit default swaps are now also taking heat for adding new layers of complexity to bankruptcy proceedings and out-of-court restructurings.

Debtors must increasingly question whether their lenders have hedged their bets by entering into credit default swaps, which essentially function like insurance policies, and promise to pay out if a company defaults.

Those creditors may have less incentive to make concessions to keep a borrower out of bankruptcy, and in...
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