ISDA: Restructuring Credit Event Occured - The Hellenic Republic

[Grenville]

ISDA EMEA Determinations Committee:Restructuring Credit Event Has Occurred with Respect to The Hellenic Republic

 

LONDON, March 9, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA) today announced that its EMEA Credit Derivatives Determinations Committee resolved unanimously that a Restructuring Credit Event has occurred with respect to The Hellenic Republic (Greece).

 

The EMEA DC resolved that a Restructuring Credit Event has occurred under Section 4.7(a) of the ISDA 2003 Credit Derivatives Definitions (as amended by the July 2009 Supplement) 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.

 

The Committee determined that an auction will be held in respect of outstanding CDS transactions on March 19.  ISDA has published a list of obligations issued or guaranteed by The Hellenic Republic, which the EMEA Determinations Committee is currently in the process of reviewing.  That list can be accessed here: http://www2.isda.org/preliminary-greek-obligations/.

 

ISDA will publish further information regarding the potential auction on its website, www.isda.org/credit, in due course.

 

Answers to frequently asked questions regarding The Hellenic Republic Restructuring Credit Event can be accessed via ISDA’s Greek Sovereign CDS page: http://www2.isda.org/greek-sovereign-cds/

 

ISDA will host a press briefing today at 9PM GMT / 4PM EST addressing the credit event ruling. A live webcast of the briefing will be available at: http://services.choruscall.com/links/isda120309.html.

http://www2.isda.org/news/isda-emea-determinations-committee-restructuring-credit-event-has-occurred-with-respect-to-the-hellenic-republic

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Good to see the ruling and know that the CDS tied to sovereigns actually protects the underlying bonds.

 

[Grenville]

The following .pdf is very helpful in learning more about the process:

 

Greek Sovereign CDS Credit Event Frequently Asked Questions (FAQ)

http://www2.isda.org/attachment/NDA5NQ==/Greek%20Sovereign%20CDS%20Credit%20Event%20FAQs%2003-09.pdf

 

Also here is a link to the voting members of each respective determinations committee:

http://www.isda.org/dc/committees.html

 

[onyx1]

At the start of 2008, an investor buying protection on Greek debt had to pay only $22,000 annually to insure against default on $10 million of Greek bonds over five years, according to Markit, a data provider. Now, the protection would cost about $7.6 million.

 

http://dealbook.nytimes.com/2012/03/09/greek-credit-default-swaps-are-activated/

[racemize]

Interesting...  Let's see how all the netting works outs.

[Parsad]

The total at risk on the credit default swaps is something like $3.2B according to something I read, so I don't think it would pose a significant issue.  What it does is set the precedent for any future restructuring, and a more significant bailout (Italy) comes to mind, could pose a systemic risk depending on counterparty liability.  Cheers!