Europe Focus

The Greek government on Friday announced that 83.5% of its private-sector creditors agreed to a bond-swap deal, moving Greece closer to securing a crucial second bailout, which could get finalized next week.

Because the rate was short of 90%, Athens exercised collective-action clauses to force more bondholders to participate. That move prompted the International Swaps and Derivatives Association committee to declare a “restructuring credit event,” which triggers a payout of some $3.2 billion in CDS on Greek debt.

All 15 members of an International Swaps and Derivatives Association committee — consisting of big banks like Goldman Sachs and J.P. Morgan, and investors like Elliott Management and PIMCO — ruled the move a “restructuring credit event.” ISDA will hold an auction on March 19 to determine how much will be paid out on CDS contracts.

As of last week, the net exposure on CDS was $3.2 billion. So if the auction showed the recovery value to be 25%, then 75% of the $3.2 billion, or $2.4 billion, would be paid out to owners of CDS.

In a conference call Friday, ISDA Chief Executive Officer Robert Pickel said he does not see a significant impact on the financial market from the Greek default and that most of the Greek CDS exposure is collateralized.

Both euro-area finance ministers and the International Monetary Fund will hold meetings next week to seek formal approval on the bailout package.

via MarketWatch