Other than a small part of the financing, Mr. Doctoroff said the city "will not be obligated" to pay off the bonds issued by the Hudson Yards Infrastructure Corporation, if the corporation defaults.
A corporation defaults on debt service if (x
A corporation defaults, if cash flows after tax do not suffice to cover debt redemption plus interest.
In their most basic application, a CDS contract is an insurance policy against a corporation defaulting on their debt.
Interest rates are heading up, bankers who lend are as scarce as hen's teeth and already there have been more corporate defaults than in all of 2007: Standard & Poor's counts 27 U.S. corporations defaulting on their publicly traded debt so far this year, versus 22 for all of last year.
Former bank traders who spoke on condition of anonymity because of confidentiality agreements with their former employers said their banks typically earned $25,000 for providing $25 million of insurance against the risk that a corporation might default on its debt via the swaps market.
Why is it moral, logical and perfectly acceptable for corporations to default on a debt but sinful, almost criminal, for a struggling homeowner to do the same thing?
Automakers and other heavy manufacturers are bracing for thousands of layoffs, which could cause more consumers and corporations to default and will most likely slow new lending.
THE chance that corporations will default on their bond payments is high because of the recession, but investors are being well paid for taking on the risk, said Michael T. Kennedy, who runs the $652 million Stein Roe Intermediate Bond fund.
The smaller the spread, the less worried investors are that corporations will default on their debts.
U.S. Concrete, a supplier to the construction industry, was one of five corporations to default in April.
