Hedge funds have locked horns over a default at one of Europe’s largest issuers of junk debt, in a fight that will determine whether investors who placed bets against the company’s bonds will receive a substantial windfall or a much smaller payout.
The dispute is over credit default swaps — an insurance-like derivative product designed to provide protection against default — on the debt of Ardagh, one of the world’s biggest producers of glass and metal drinks containers, which recently underwent a contentious restructuring.
A panel of experts that adjudicates disputes in the multitrillion dollar global CDS market has become the target of a fierce lobbying battle, in a rare public spat that pits London-based Arini Capital Management against rival funds.