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Minibond Series 1- 10. For the credit default swap – “first to default” swap between Minibond Ltd and Lehman Brothers Special Financing (LBSF), the noteholders did not received the full interest from Minibond Ltd on 13 November 2008. This is due to the fact that LBSF did not remit the promised interest to Minibond Ltd as stipulated in the credit default swap agreement. So the default is committed by LBSF. Since LBSF is the party to default, then under commercial law LBSF should compensate Minibond Ltd. As there is no compensation, the CDS agreement becomes lapse and Minibond Ltd can walk away from this agreement. The receivers PricewaterhouseCoopers did the right and honourable thing – to terminate the agreement as Minibond Investors do not received any benefit from the CDS with LBSF. Very funny thing here, the lawyers acting for Lehman have the gal to challenge the termination notice, since it is LBSF who default in this first instance. Another question is why terminating the swaps come with a cost. Why is this cost? Legal fees to terminate the agreeement?
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