Sellers of protection on the debt of petrochemical company LyondellBasell Industries will pay out over US$700 mln to settle credit default swaps after an auction on Thursday. Outstanding CDS on LyondellBasell amounted to a total net notional value of US$715 mln as of March 27, according to the Depository Trust & Clearing Corp, which registers most CDS contracts. Europe's first auction of CDS on a high-yield company set the final value of the contracts at 2%, according to results published by auction administrators Creditex and Markit, which means a payout of 98%.
LyondellBasell had said that it would not make interest payments on 2015 bonds, a move that triggered payment under CDS contracts. Interestingly, LyondellBasell has not yet legally defaulted on repayment of its bonds. Its US operationshas filed for Chapter 11 bankruptcy protection months ago, but it has won an injunction that prevents holders of the 2015 bonds from taking action against the European business.