ISDA Determines Credit Event Occurred In Greece

The EMEA Determinations Committee of the International Swaps and Derivatives Association (ISDA) met on Friday last week (9 March) to discuss the Greek debt swap deal and to determine whether the deal amounts to a "Restructuring Credit Event", thus triggering settlement under credit default swaps (CDS) referencing the Greek sovereign. The Determinations Committee decided that a "Restructuring Credit Event" has occurred. The decision was based on the invoking by Greece of collective action clauses ("CACs") to force all holders to accept the exchange offer for existing Greek bonds. The invoking of the clauses means that the "haircut" suffered by bondholders is not voluntary and falls within the definition of "Restructuring" in the 2003 ISDA Credit Derivatives Definitions.