Greece Not Credit Event, ISDA Says

Ruling means credit-default swaps on nation’s debt won’t pay out.

Default insurance on Greek debt won’t be paid out, the International Swaps & Derivatives Association said after it was asked to rule whether part of the nation’s $170 billion bailout was a credit event.

The group said the European Central Bank’s exchange of Greek bonds for new securities exempt from losses being imposed on private investors hasn’t triggered $3.25 billion of outstanding credit-default swaps. ISDA’s determinations committee, including JPMorgan Chase & Co. and Pacific Investment Management Co., said the switch didn’t constitute subordination, one of the criteria for a payout under a restructuring event.

Counterparty Concern

Despite concerns at that time about a daisy chain of losses if counterparties failed to meet their commitments, the Lehman settlement and those of swaps guaranteeing debt of Fannie Mae and Freddie Mac were “orderly” and caused no major disruptions for the market, according to regulators.

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