It appears that Blue Mountain assumed that Cablecom Luxembourg S.C.A. (CABCOL) would cancel their debt but instead issued more debt.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAGLLFzoxbXY&refer=home

http://www.ft.com/cms/s/93c88c4e-6ae0-11db-83d9-0000779e2340.html

http://www.ft.com/cms/s/f9a56cea-6adf-11db-83d9-0000779e2340.html

Blue Mountain were one of the first people to use QuoteVision - the company I used to work for

http://www.creditma.com/clients.aspx

One of the F.T. articles states

"However, for a CDS contract to be valid, it needs to be backed up by some tangible bonds in the marketplace (even if far smaller in size). Usually, that is not a problem, since few companies are debt free. But if corporate events occur which prompt a company to withdraw its bonds - such as a merger - this can suddenly make CDS contracts worthless"

Interesting, as companies such as Nokia do not have bonds outstanding, yet have CDS traded on them. I remember this happening with Sainsburys last year. I believe there is a CDS market as traders are trading on the assumption that there will be bonds issued at some point in the future, so are creating a market in anticipation

Janet Tavaloki is quoted in the other FT article - her two books

http://www.amazon.co.uk/Collateralized-Debt-Obligations-Structured-Finance/dp/0471462209/sr=8-1/qid=1162552071/ref=sr_1_1/026-8787779-9446068?ie=UTF8&s=books

http://www.amazon.co.uk/Credit-Derivatives-Synthetic-Structures-Applications/dp/047141266X/sr=8-2/qid=1162552071/ref=sr_1_2/026-8787779-9446068?ie=UTF8&s=books

 give other examples of where there has been contractual disputes in the past - one example being the Nomura and CSFB case

http://www.credit-deriv.com/crenewsjan03.htm#nomura_wins