The Europe, Middle East and Africa Credit Derivatives Determinations committee of the International Swaps and Derivatives Association has determined today that Greece has triggered a credit event by restructuring its bonds. The DC will hold an auction for outstanding credit default swaps on March 19 to determine the payout rates on USD3.2 billion worth of CDS. This week, ISDA released a list of bonds issued or guaranteed by Greece. The DC is currently reviewing the list of bonds.
The EMEA DC resolved that a Restructuring Credit Event ... following the exercise by The Hellenic Republic of collective action clauses 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, according to a statement from the association.
The DC reached its conclusion after approximately 85% of bondholders agreed to a voluntary restructuring of debt. The Greek government then exercised its so-called collective action clause, which allows the country to force bondholders to accept a smaller payout with a longer maturity if 75% or more of bondholders agreed to the restructuring.
On March 1, the DC determined that Greece had not triggered a credit event after considering two questions. The first was whether holders of Greek bonds were subordinated to the European Central Bank after the ECB agreed to buy EUR130 billion in Greek bonds as part of a bailout agreement. The second question was whether there had been any private agreements between bondholders and Greece that would constitute a restructuring. Both decisions were unanimous. (DI, 3/01)