No CDS Payout Triggered by Greek Debt Swap

A subcommittee of The International Swaps and Derivatives Association (ISDA) has ruled that the debt swap deal agreed to by Greece and the EU did not represent credit default events and, therefore, would not lead to the payments to holders of credit default swaps (CDS) on Greek debt.

The Wall Street Journal reports that two different questions posed by CDS market participants did not apply in this case. One issue was whether or not the collective action clauses inserted in the Greek-law bonds were themselves a “credit event.” The second question asked whether or not the agreement between Greece and its bondholders constituted a restructuring and, therefore, a “credit event.” The ISDA committe unanimously declared that neither issue was at play in the Greek debt swap.

The ISDA ruling is available here.