Delphi CDS
Recovery at default time is different than at bankruptcy exit time. Sometimes vastly different as for Delphi.
In 2005 when Delphi went bankrupt there was some fear of a short squeeze in the underlying bonds a the number of outstanding CDS was 12 times that of the underlying bonds. An auction was held to help get a cash settlement for excess CDSs.
Recovery price: 63.375
Delphi is having some difficulty getting out of bankruptcy and current recovery is estimated at around 32.000.
With the benefit of hindsight, paying cash instead of taking bonds was a very clever or lucky move.
Delphi Auction Results
Delphi May Require GM Financing for Bankruptcy Exit
Meter still running on GM’s Delphi ride