Blackstone Group LP’s GSO Capital Partners said that it could support “appropriate changes” to credit-default-swap contracts in response to U.S. regulators’ apparent concerns around a derivatives trade on Hovnanian Enterprises Inc., WSJ Pro Bankruptcy reported. Hovnanian skipped an interest payment due Tuesday on bonds it repurchased and parked with an affiliate, opening the door for GSO to collect payouts on credit-default swaps that insure against nonpayment. The missed payment moves GSO’s complex trade, hatched on the sidelines of a Miami finance conference in February 2017, to the actual from the theoretical just as U.S. financial regulators began to weigh in. It will be up to an International Swaps and Derivatives Association committee whether the default triggers credit-default-swaps contracts tied to Hovnanian debt. The nonpayment was required of the home-building company under a sweetheart-lending deal with GSO featuring off-market debt designed to maximize the payday.
