ISDA May Reconsider Greek Swaps

Collective action clauses could lead to another vote on whether swaps were triggered.

Holders of credit-default swaps on Greek bonds shouldn’t tear up their contracts after yesterday’s ruling against a payout. The International Swaps & Derivatives Association said the swaps hadn’t been triggered by the European Central Bank’s exchange of Greek bonds for new securities exempt from losses taken by private investors. The group will now probably be asked to determine whether collective action clauses, or CACS, being used by Greece to impel investors to participate in a wider exchange of bonds that would trigger the swaps.

“They will have to enforce CACS,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam. “At that point the exchange will become coercive and that will be a restructuring event for CDS.”

‘One Final Vote’

The ECB’s exchange of Greek bonds didn’t constitute subordination of private investors, one of the criteria for a payout under a restructuring event, ISDA said. The group’s determinations committee wouldn’t rule out a credit event “at a later date,” according to the statement.

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