Greece Deal Triggers $3B in Default Swaps: ISDA!

• It appears the ISDA will not be able to deny the obvious. A credit event: default has occurred and CDSs will be triggered. Exactly how much, US$3.5B or more, nobody knows.
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  Greece Deal Triggers $3B in Default Swaps: ISDA 
  By Abigail Moses and Mary Childs, http://www.bloomberg.com/ 
  Greece’s use of collective action clauses forcing investors to take losses under its debt restructuring triggers payouts on about $3 billion of default insurance, the International Swaps & Derivatives Association said.
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  A total 4,323 credit-default swap contracts may now be settled after ISDA’s determinations committee ruled the use of CACs is a restructuring credit event, the industry group said in a statement today. Before the ruling, the cost of five-year Greek swaps rose to a record $7.68 million upfront and $100,000 annually to insure $10 million of debt.
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  A settlement may bolster confidence in the $257 billion government-debt insurance market that’s used by banks, hedge funds and institutional investors to protect against losses or to speculate on creditworthiness after Greece’s restructuring tested the viability of the swaps as a hedge. ISDA rejected a request on March 1 to declare that swaps were triggered because the European Central Bank’s exemption from losses effectively subordinated private investors.
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  … for more click here! 
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  ISDA declares Greek credit event, CDS payments triggered 
  By Daniel Bases | Reuters 
  NEW YORK (Reuters) – Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors, the International Swaps and Derivatives Association said on Friday. The decision by the EMEA Determinations Committee to declare a so-called credit event was unanimous, ISDA said in a statement.
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  Markets showed little reaction to the widely expected decision. The euro edged lower against the U.S. dollar while U.S. Treasury prices saw losses pared after the ISDA announcement. The ISDA said the use of “collective action clauses (CACs) to amend the terms of Greek law governed bonds issued by The Hellenic Republic such that the right of all holders of the Affected Bonds to receive payments has been reduced.”
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  The “credit event” ruling means a maximum of $3.16 billion of net outstanding Greek credit default swap contracts could be paid out, though the actual amount is likely to be lower because bondholders are not losing all of their original investment. ISDA said the auction will be held to determining the actual payout amounts on March 19.
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  … for more click here!

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