DelphX Introduces Industry-First Credit Rating Security Product; Will Enable Bond Holders to Protect Against Rating Downgrades on Existing Bonds

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[{"type":"text","content":"DelphX Introduces Industry-First Credit Rating Security Product; Will Enable Bond Holders to Protect Against Rating Downgrades on Existing BondsToronto, Ontario--(Newsfile Corp. - November 8, 2022) - DelphX Capital Markets Inc. (TSXV: DELX) (OTCQB: DPXCF) (\"DelphX\"), a leader in the development of new classes of structured products for the fixed income market, announced today the addition of a novel Credit Rating Security (CRS) product that will give bond holders and traders the ability to position against potential rating changes on existing bonds. This represents a very large market, as most institutional-quality bonds carry creditworthiness ratings ranging from AAA (strongest) to C or D (weakest) from rating agencies such as Moody's, Standard & Poor's, and Fitch. These ratings are not static, but often fluctuate during the life of a bond, affecting the market value of the underlying asset. Due to the revolutionary nature of this industry-first product, DelphX has filed a provisional patent to protect its intellectual property rights ahead of the initial launch. The new CRS product is based on the Company's Collateralized Put Obligation (CPO) and Collateralized Reference Note (CRN) products, which have already been proved and tested in the marketplace. The development of this rating-triggered CRS product came from discussions with bond desks seeking transactional volume as well as large portfolio holders, who have historically had access to long-term protection against defaults during the life of a bond, but lacked a mechanism to protect against rating downgrades that can reduce the value of the bond prior to maturity. This is a major problem for portfolio managers with strict rating mandates, particularly insurance companies and pensions, who face capital charges and forced sales when the bonds they hold are rated below certain thresholds. The DelphX CRS product solves this problem by creating a collateralized reference note designed to cover the expected reduction in value of a bond following a rating downgrade, such as from BBB to BB. The collateral sets a maximum payout predetermined by both parties and is deposited at the outset. Should a rating change trigger occur, the insured party will receive from this collateral the net change in the value of the reference bond at the time the CRS was issued and the market val...

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