LONDON, Oct 27 (Reuters) - A new voluntary deal for holders of Greek debt to accept deeper losses is unlikely to trigger a ‘credit event’ that would cause a payout on default insurance, said a top lawyer at the International Swaps and Derivatives Association.
Greek bondholders face losses of 50 percent under a plan to lower the country’s debt burden and contain the euro zone’s long-running debt crisis. The aim is to complete negotiations on the package by the end of the year.
But because participation in the deal is voluntary rather than forced, it would typically not trigger payment on CDS contracts
“As far we can see it’s still a voluntary arrangement and therefore we are in the same position as we were with the 21 percent when that was agreed,” said David Geen, general counsel at derivatives body ISDA, referring to an original deal proposed in July that involved smaller bondholder losses.
“The percentage (of losses), as far as the analysis for CDS purposes goes, doesn’t change things. typically a voluntary arrangement won’t trigger the CDS.”
Geen said the final decision on whether a credit event has occurred rested with the ISDA determinations committee, which would consider the issue when requested to do so by a CDS market participant.
For more on the ISDA determinations committee, see here:
Latest data shows a net total of $3.67 billion outstanding in Greek CDS contracts. For a factbox on euro zone sovereign CDS volumes see