Greece technically defaulted on its bonds yesterday. Bondholders tendered 152 billion euros ($201 billion) or 85.8 percent, of bonds governed by Greek law after the government made its bond swap offer. In order to avoid a default 95% of the bondholders had to voluntarily participate. However, the 85% exceeded the amount (66.6%) needed to invoke the collective action clause to force all investors to take part in the sovereign restructuring. This should trigger $3 billion of insurance payouts under rules governing credit-default swap contracts. The International Swaps & Derivatives Association’s determinations committee meets at 1 p.m. in London today to decide whether the use of CACs is a restructuring credit event which will cause a payout of swaps insuring Greek debt.
So now everyone’s attention will turn to the counterparty’s of those credit-default swap contracts to see if they can pay or if they will default in a daisy chain of events.
Assistant State Treasurer
Chief Investment Officer
State of Louisiana
Department of the Treasury