CDS Not Triggered by Greek Bailout: ISDA

The bailout of Greece involving an exchange of sovereign bonds did not constitute a credit event and therefore need not trigger credit default swaps to pay creditors, according to the International Swaps & Derivatives Association.

Bloomberg reported Thursday that the ISDA, asked to rule on whether a credit event had taken place that would trigger insurance payouts on bonds, said that the European Central Bank’s exchange of Greek bonds for new securities exempt from losses being imposed on private investors did not constitute subordination, which is a requirement for a payout under a restructuring event.

In a statement, ISDA said in part, “The situation in the Hellenic Republic is still evolving” and the decisions it rendered Thursday “do not affect the right or ability to submit further questions.” It added that its decision is not an expression of the committee’s “view as to whether a credit event could occur at a later date.”