IT'S OFFICIAL: ISDA TRIGGERS GREEK CDS http://t.co/yNyXLzu2 $$
By Katy Burne
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Payouts on a net $3.2 billion of insurance-like
contracts designed to protect against losses on Greek sovereign debt have been
triggered, after the country forced certain private creditors into its debt
restructuring who did want to accept the terms of the deal, a committee of
dealers and investors decided Friday.
The request made early Friday to the special committee of the International
Swaps and Derivatives Association, which rules on such matters for the
credit-default swaps market, was made following Greece's use of so-called
"collective-action clauses" in its domestic-law bonds.
Collective-action clauses were inserted into the bonds' documentation
retroactively, after Greece passed a law last month allowing it to strong-arm
all private investors into its restructuring--even investors who said they
weren't willing to participate.
That action made the deal, which was billed as voluntary because of the many
participants who did sign up, not truly voluntary for all. If a debt
restructuring is agreed between "a governmental authority and a sufficient
number of holders of such obligation to bind all holders," making it mandatory,
CDS can be triggered, according to ISDA's credit derivatives definitions.
The 15-strong Determinations Committee for Europe, convened by ISDA, voted
unanimously that a restructuring credit event had occurred, triggering
compensation owed to holders of CDS protection on Greek debt. One auction will
be held to settle relevant CDS contracts on Greece.
The association had already indicated in January that if collective-action
clauses were used by Greece to effect a reduction in coupon or principal, it
could trigger Greek CDS.
CDS, which function like insurance for both corporate and sovereign bonds,
can be triggered by a restructuring; a failure to make timely interest or
principal payments; or a bankruptcy, among other things.
-By Katy Burne, Dow Jones Newswires; 212-416-3084; katy.burne@dowjones.com
(END) Dow Jones Newswires
March 09, 2012 15:01 ET (20:01 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.
030912 20:01 -- GMT |
