Financial Times
March 1, 2012
Billions of dollars in credit default insurance on Greek sovereign bonds will not yet be paid out despite next week’s restructuring of €186bn of the country’s debt, an industry body has ruled in a move that raised complaints from some investors.
The International Swaps and Derivatives Association decided that the bonds had not suffered a so-called credit event, industry jargon for a default on debt or a signficant negative change in its terms.
Under Greece’s planned restructuring, some £186bn of bonds will next week be swapped for new, longer-maturing debt with lower coupon payments. A further €20bn is expected to be swapped next month as part of a second round of restructuring.
The body’s determinations committee rejected two requests to declare a credit event. One was based on grounds that the European Central Bank was being given de facto seniority in a controversial debt swap and the other cited the introduction by Greece of legislation that would require any recalcitrant bondholders to take part in the swap should support for the deal pass a certain level.
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