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San Antonio’s iHeartMedia dealt another blow

December 21, 2016

IHeartMedia Inc. was dealt another set back Wednesday after a New York group that oversees derivatives trading unanimously ruled that the company’s partial bond payment last week triggers repayment on financial contracts tied to the company’s debt.

The International Swaps and Derivatives Association, a self-regulatory body that oversees the industry, decided that iHeartMedia’s decision to withhold part of a $250 million bond payment due Dec. 15 was a “failure to pay credit event,” ISDA posted on its website. The decision requires investors to close out all outstanding credit derivatives, used to insure against a company’s chances of default, that were taken out on iHeartMedia’s bonds.

The group of 15 Wall Street trading firms, including JPMorgan Chase, Bank of America, Goldman Sachs and Morgan Stanley, unanimously decided that ISDA should hold one or more auctions to settle up the complex financial contracts, according to ISDA.

Investors buy credit derivatives to insure against the possibility that a company won’t make good on its bond payments. There are 3,173 so-called credit default swaps with a net notional balance of $748 million on iHeartMedia’s bonds as of Dec. 21, according to the Depository Trust Clearing Corp., which processes such transactions.

The decision will primarily affect the hedge funds and other Wall Street investors that speculated on iHeartMedia’s financial future and won’t necessarily have a big impact iHeartMedia’s books.

This story is developing.