Such is the conclusion based on a Bloomberg article that notes that MGM Mirage is being pressured by none other than Icahn and Oaktree Capital. According to Bloomberg, "Icahn and Oaktree purchased hundreds of millions of dollars of MGM Mirage bonds and have told the company it should overhaul its debts in bankruptcy, the Wall Street Journal reported, citing unidentified people familiar with the matter. The investors contacted the company last month to say bankruptcy is the best option, the newspaper reported."
Neither the WSJ nor Bloomberg mention the possibility that the two distressed investors may have loaded up on bad, evil, terrorist-even CDS and are hoping to get cashed out that way. Observant readers point out that as recently as this past week, the MGM net notional exposure went from $1.4 billion to $4.1 billion per DTCC: if any regulators still care about something more than killing equity shorts, this may be worth their invaluable time.
MGM's CDS is currently trading 49/51 upfront, or roughly 3,200 bps running. The CDS hit a wide of over 8,000 bps on March 8, indicating what the profit potential is to holder of CDS. Of course, MGM Mirage has options in dealing with CDS-armed "terrorizers" (Zero Hedge would be happy to discuss these with pa Kirk) and avoid getting forced into a bankruptcy by distressed negative-basis loaded banditos. Alternatively, 1yr/5yr flatteners here may seem oddly attractive for ballsy accounts.
Lastly, Zero Hedge wants to point out it is still and always will be a big fan of the bankruptcy convergence trade in any of its gruesome incarnations.
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