Did CDS just get declared worthless thanks to Credit Suisse? - interesting development

[devil21]

I'm wading through it and working on comprehending the specifics but wanted to get this out there since no one is talking about it. The "Committee" (CDDC) who decides whether a CDS pays out, which happens to be made up of various banking interests (the counter-parties of said swaps lol.....sounds legit and fair, right?) has determined that Credit Suisse CDS against CS' Tier 1 bonds will not pay out to CDS holders.

https://www.ft.com/content/dacd39a2-7f70-44e3-91d1-7e300f901dad

Can a bond that no longer exists trigger a default?

This is the quasi-metaphysical question facing the panel of experts who have to determine whether Credit Suisse’s credit-default swap contracts will pay out. Call it Schrödinger’s swap.

While most in the market had assumed that Switzerland’s decision to vapourise $17bn of Credit Suisse’s Additional Tier 1 bonds would not trigger the bank’s CDS (for reasons we’ll get into below), a couple of US hedge funds have wagered that nearly everyone has overlooked crucial quirks in the derivative contracts that could lead to a payout.

more at link

(I'll update with further thoughts if necessary....feel free to share any thoughts)