PrefBlog

Connor Clark & Lunn has announced:

that Tribune Company’s decision to voluntarily restructure its debt obligations under the protection of Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware is expected to constitute a credit event under the credit linked note (“CLN”) issued by their respective counterparties.

When it was chosen for inclusion in the Reference Portfolios, Tribune was in a stable industry with ample cash flow generation and rated A- by Standard & Poor’s. In December 2007, Tribune was acquired in a leveraged buy-out which reduced its rating to B- and it needed to sell off assets in order to raise cash to pay down its large debt load. Following the acquisition, a precipitous decline in revenue and a tough economy coupled with the credit crisis that makes it extremely difficult to support its current level of debt.

When Connor, Clark & Lunn Capital Markets Inc. receives further information regarding the credit event and the recovery rate we will provide an update on the impact on the companies.

A very defensive sounding press release! Bloomberg has a story on the Tribune filing.

Guys, guys, guys! I’m an old bond guy. I’ve been there. Bad things happen. The problem is not your selection of Tribune Company as one of your 125-odd names. The problem is your decision to concentrate your investment (by the terms of the credit note) to such an extent that a single default becomes a major problem. Such a note can make sense to both the buyer and the seller, as long as both realize that it’s disaster insurance; the buyer of the note gets a small premium and assumes the very small risk of a very large payout. But … that risk is increasing.

RPQ.PR.A was last mentioned on PrefBlog when the dividend was suspended and the rating withdrawn.

RPB.PR.A was last mentioned on PrefBlog when the dividend was suspended and the rating withdrawn.

RPA.PR.A was last mentioned on PrefBlog when S&P downgraded it to P-2.

PRF.PR.A was last mentioned on PrefBlog with respect to the Lehman credit event.

None of these issues is tracked by HIMIPref™.

This entry was posted on Monday, December 8th, 2008 at 7:18 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.