Tags: greek | bond | default | insurance

Greek Debt Relief to Trigger Bond Default-Insurance Payout

Friday, 09 Mar 2012 03:05 PM

The agency that oversees financial derivatives says a massive debt relief deal for Greece constitutes a so-called credit event, meaning it will trigger payouts on bond insurance.

The International Swaps and Derivatives Association said Friday that its determinations committee "resolved unanimously that a Restructuring Credit Event has occurred with respect to The Hellenic Republic."

That means holders of credit default swaps on Greek bonds will be able to claim insurance payments as a result of Greece's decision to force its debt holders into a bond swap.

There had been fears that the payout of such insurance could spark a cascade of losses for banks and other important investment funds.

But ISDA has said that overall payouts on CDS linked to Greek bonds will be less than $3.2 billion, relieving fears that they could fell a big financial firm.


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