According to the International Swaps and Derivatives Association (ISDA), in an unanimous decision, Greece has suffered a "credit event" triggering Credit Default Swaps, from Official Report:
The EMEA DC has resolved to hold an auction with respect to the settlement of standard credit default swaps for which The Hellenic Republic is the reference entity. To maximise the range of obligations that market participants may deliver in settlement of any such credit default swaps, the EMEA DC has agreed to run an expedited auction3:03 PM: ISDA has issued a full statement:
process such that the auction itself will take place on March 19, 2012. In light of this expedited auction process, market participants should submit any obligations that they would like to include on the list of deliverable obligations to ISDA as soon as possible.
March 9, 20123:18 pm: ISDA declares Greek credit event, CDS payments triggered, from Reuters:
In light of today’s EMEA Determinations Committee (the EMEA DC) unanimous decision in respect of the potential Credit Event question relating to The Hellenic Republic (DC Issue 2012030901), the EMEA DC has agreed to publish the following statement:
The EMEA DC resolved that a Restructuring Credit Event has occurred under Section 4.7 of the ISDA 2003 Credit Derivatives Definitions (as amended by the July 2009 Supplement) (the 2003 Definitions) 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 (the Affected Bonds) such that the right of all holders of the Affected Bonds to receive payments has been reduced.
The EMEA DC has resolved to hold an auction with respect to the settlement of standard credit default swaps for which The Hellenic Republic is the reference entity. To maximise the range of obligations that market participants may deliver in settlement of any such credit default swaps, the EMEA DC has agreed to run an expedited auction process such that the auction itself will take place on March 19, 2012. In
light of this expedited auction process, market participants should submit any obligations that they would like to include on the list of deliverable obligations to ISDA as soon as possible.
Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors, the International Swaps and Derivatives Association said on Friday...There will be auctions in the coming weeks to determine the exact amount.
The ruling means a maximum of $3.16 billion of net outstanding Greek credit default swap contracts could be paid out, though the actual amount is likely to be lower because bondholders do not lose all their original investment.
3:29 pm: From Bloomberg:
A total 4,323 credit-default swap contracts can now be settled after ISDA’s determinations committee ruled the use of CACs is a restructuring credit event. Before the ruling, Greek swaps rose to a record $7.68 million in advance and $100,000 annually to insure $10 million of debt for five years...3:53 pm: From the Telegraph's Live Debt crisis and Greek bond swap Feed:
Policy makers including former European Central Bank President Jean-Claude Trichet opposed payouts on Greek credit- default swaps on concern traders would be encouraged to bet against failing nations and worsen the region’s debt crisis...
A swaps trigger “raises the question of which country is next and which banks are most exposed,” Hank Calenti, a bank analysts at Societe Generale SA in London, wrote in a note. “Less than six months ago we had the head of the ECB exhorting that there must be no credit event on Greece,” he wrote.
The determinations committee which decides whether a credit event has occurred consists of representatives from 15 dealers and investors. The group, which includes Deutsche Bank AG (DBK), Pacific Investment Management Co. and Morgan Stanley, rules after a request is made by a market participant.
In a restructuring credit event investors have the right to choose whether to settle their default swap contracts.
Auctions will set a recovery value on the bonds and swaps sellers will pay buyers the difference between that and the face value of the debt.
Germany wants a new debate on the EU constitution. The country's foreign minister Guido Westerwelle told reporters on the sidelines of a meeting of EU foreign ministers in Copenhagen:
We have to open a new chapter in European politics. We need more efficient decision structures. I think we have to reopen the debate about a European constitution again. We have a good treaty, but we need a constitution ... There are new centres of power in the world.
4:04 pm: Greece success in bond deal but not in solving debts from the Telegraph:
After a marathon seven-hour meeting, the International Swaps & Derivatives Association (ISDA) tonight dramatically declared a "credit event had occurred" and billions of euros of credit default insurance will have to be paid out. The credit default swap (CDS) market is opaque but analysts estimate the ruling will cost European banks around €3.5bn....4:28 pm: Some background on Credit Default Swaps using Greece Example - How gross and net CDS notionals really work form the Financial Times:
Lucas Papademos, Greece's technocratic interim prime minister, said the "largest restructuring ever made" had delivered Greece from the "quicksand of the past months... onto solid ground." He pledged that Greece understood the "significant damage" unleashed on investors and that it had "no right to squander" the debt it had been forgiven. He vowed to "modernise the country, make our economy competitive, and tidy up the state."
Experts warned the deal had failed to addresses Greece's crippling debt problem. Instead, by imposing heavy losses on Greek banks and pension funds, it may have destablised the country even more.
According to the Depository Trust and Clearing Corporation (DTCC), there is $75bn gross notional outstanding for CDS contracts referencing Greece. However, on a net basis this figure reduces substantially to $3.7bn.5:33 pm: IMF now wants Greece to take on More Debt, IMF chief proposes 28 billion euro Greek loan for 4 years from Reuters:
What do these different numbers tell you, and how are they constructed?
The International Monetary Fund next week will consider making a loan worth 28 billion euros ($36.7 billion) to Greece over a four year period, as part of a second international bailout package for Athens.
7:05 pm: Moody's declares Greece to be in default on its debt, from AFP:
Moody’s declared Greece in default on its debt Friday after Athens carved out a deal with private creditors for a bond exchange that will write off 107 billion euros ($140 billion) of its debt.
Moody’s pointed out that even as 85.8 percent of the holders of Greek-law bonds had signed onto the deal, the exercise of collective action clauses that Athens is applying to its bonds will force the remaining bondholders to participate...
“According to Moody’s definitions, this exchange represents a ‘distressed exchange,’ and therefore a debt default,” the US-based rating firm said.
For one, “The exchange amounts to a diminished financial obligation relative to the original obligation.”
Secondly, it “has the effect of allowing Greece to avoid payment default in the future.”