Reuters) - Greece's recent moves to prepare for a debt restructuring have not triggered a payout on credit default swaps, the International Swaps and Derivatives Association said on Thursday.
However, a credit event is still widely expected if Greece uses recently approved legislation enabling it to force its debt restructuring upon all of its private creditors. This could happen shortly after the window for the restructuring deal closes on March 8.
Ministers released €58bn (£48bn) of cash designated to smooth the €206bn bond restructuring but withheld the remaining €71.5bn allocated to help the Greek government.
Eurozone finance ministers, who met in Brussels ahead of European Union leaders summit on Thursday night, said they would hold a conference call on Friday, March 9 - a day after the bond swap deadline - and postpone a decision until a eurogroup meeting on Monday, March 12.
The delay will push Greece to within eight days of bankruptcy - a move likely to rattle global markets and put eurozone leaders on a collision course with America and China.
CDS traders are sticking to their baseline scenario of CACs being exercised sometime between March 8 and March 12, at which point CDS should trigger. ISDA has previously signalled the use of CACs to reduce the principal of the bonds should trigger CDS, and the Committee certainly left the door open for a future trigger in a statement today.
“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,” said the Committee.
The market is more focused on the timing of a CDS auction for the $3.3bn net notional Greek CDS outstanding. Participants are particularly interested in which bonds will be deliverable into the auction and the subsequent impact on settlement price.
“There are potential complexities around the auction and how the debt exchange will occur, but we are fairly confident these will be relatively minor issues,” said the head of credit strategy at a major house.
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