Template:M summ Credit Derivatives 4.7

The problem with Restructurings is that while they are often the sort of stunt a failing entity pulls, and can in that case mightily tank the value of an issuer’s senior debt obligations — exactly the contingency credit default swaps are meant to protect against — they are, in their way, not actually defaults, but rather are an accommodation reluctantly agreed to by creditors to stasve off a default — in which case the bonds may therefore recover, even though they never quite live up to their original promise — but sometimes they take place for benign reasons too, unrelated to the deteriorating of the issuer.

Those latter events you don’t want to capture, of course, but in their early attempts to define “Restructuring” ISDA’s crack drafting squad™ repeatedly found it had cast its net too widely.

The answer — always a securities lawyer’s answer, is to go deeper into the weeds and carve in, carve-out, cross-carve until the weeds resemble some Mannerist catacomb. If you think Restructuring is fun, just wait till yuou get a load of Mod R and Mod Mod R.

One fun one was the redenomination of debt obligations issued in, say Deutsche Marks, into euro as a result of European monetary union. So, even though that will never happen again, it is still listed as an excluso from the later versions of Restructuring and is canon in thee 2014 defs.