The bets CPS made were in the form of swap contracts. Swaps are agreements between the bond issuers, in this case CPS, and banks where each party makes a bet that various market indexes will go lower or higher than the amounts it has already pledged to pay to bondholders. The district, which bet mostly on higher interest rate environments than occurred, was on the losing side of these agreements. When the district's bond ratings dropped to junk status, it was disqualified from the deals. Based on the terms of the deals, CPS had to pay the negative value of the swaps contracts — $233 million — once they were terminated by the banks.