Following this morning's meeting, ISDA has announced that CDSs on Greek bonds have not been triggered, ie there is no credit event....yet.
However, ISDA has also stated that its decision may change as PSI progresses.
One might ask how it is that a 75% haircut is not a credit event, and has ISDA taken leave of its collective senses?
The answer is that we will have to wait until the CACs are used, before determining whether ISDA has taken leave of its senses (ie CACs will be th trigger).
Here is their statement in full:
EMEA Determinations Committee Statement March 1, 2012
In light of today’s EMEA Determinations Committee (EMEA DC) unanimous decisions in respect of the two potential
Credit Event questions relating to the Hellenic Republic (DC Issue 2012022401 and DC issue 2012022901), the EMEA
DC has agreed to publish the following statement:
The first submitted question (DC Issue 2012022401) asked whether the holders of Greek law bonds had been
subordinated to the ECB and certain NCBs whose bonds were acquired by the Hellenic Republic prior to the
implementation of new Greek legislation such that such subordination constitutes a Restructuring Credit Event. (The
full text of the question is available here http://www.isda.org/dc/view.asp?issuenum=2012022401.)
The EMEA DC unanimously determined that the specific fact pattern referred to in the first submitted question does
not satisfy either limb of the definition of Subordination as set out in the ISDA 2003 Credit Derivatives Definitions
(the 2003 Definitions) and therefore a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003
The second submitted question (DC Issue 2012022901) asked whether there had been any agreement between the
Hellenic Republic and the holders of private Greek debt which constitutes a Restructuring Credit Event. (The full text
of the question is available here http://www.isda.org/dc/view.asp?issuenum=2012022901.)
The EMEA DC determined that it had not received any evidence of an agreement which meets the requirements of
Section 4.7(a) of the 2003 Definitions and therefore based on the facts available to it, the EMEA DC unanimously
determined that a Restructuring Credit Event has not occurred under Section 4.7(a) of the 2003 Definitions.
The EMEA DC noted, however, that the situation in the Hellenic Republic is still evolving and today’s EMEA DC
decisions do not affect the right or ability of market participants to submit further questions to the EMEA DC relating
to the Hellenic Republic nor is it an expression of the EMEA DC’s view as to whether a Credit Event could occur at a
later date, in each case, as further facts come to light.