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ISDA to hold meeting to discuss Greek Sovereign Debt CS:

Insight February 28, 2012

ISDA is going to hold a meeting on Thursday (11:00 a.m. GMT) to discuss whether Greece's debt swap should be considered a "credit event" under the current Credit Derivatives Definitions.

The primary issue for consideration is whether the Greece's Parliament decision to retroactively implement collective action clauses, or CACs, on debt governed by Greek law constitutes a "restructuring credit event." CACs force all bondholders to participate in a bond swap once the issuer has won a specified level of approval. This possible “restructuring” would treat bondholders of debt governed by Greek law different from bondholders who hold other Greek debt.

One of the major concerns regarding Greece's debt restructuring was whether the difficult agreement with private debt holders would give those who purchased protection on Greek sovereign debt their justification for demanding payment. If ISDA's European Determinations Committee agrees a credit event has occurred, it will likely lead to a pay out on outstanding Greek CDS contracts.