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As ISDA Sits To "Find" If Greek CDS Triggered, It Gets Second Greek Default Determination Request
Somehow, following three years of defaults, the world has only now figured out that the ISDA CDS trigger determination committee is made up of the same bankers, who stand to lose everything in the case of global out of control contagion, such as that which may occur if an unwelcome CDS trigger sends the house of cards collapsing, and force mark to market losses on all those institutions which hold impaired debt at par (all of them). As a result, the ISDA meeting which is currently in process is expect to find absolutely nothing, and we agree, however not for that particular 'conspiratorial' reason, but because ISDA is waiting for the PSI outcome for a realistic finding on a credit event. Because after all ISDA is not stupid: they don't want to appear like a pushover - remember how vehemently ISDA had opposed a Greek CDS trigger in the days when Europe still was not prepared for this outcome - but on the other hand wants to preserve some CDS market credibility, which would disappear if none of the recent events in Greece were to trigger CDS. Yet more Greek creditors are getting impatient. Even as the first ISDA meeting has to find (that there has been no CDS trigger), the association's determination committee has just released that it has gotten a second question whether a "Restructuring Credit Event occurred with respect to The Hellenic Republic?" We find it rather odd (or not really) how suddenly quite a few requests are springing out of the woodwork by creditors who obviously are interest in a Greek default. As such the PSI gets quite interesting, because if the pre-PSI action is any indication, quite a few creditors are rather interested in triggering just the event they now consistently badger ISDA with.
Here is the second question in its entirety:
Does (i) the agreement that has been reached between the Hellenic Republic and a number of private sector holders of Greek debt (the “PSI Agreement”) to vote in favour of the invitation described in the Invitation Memorandum dated 24 February 2012 by the Hellenic Republic to the holders of each series of securities listed in the Invitation Memorandum (the “Designated Securities”) to offer to exchange the Designated Securities for new securities (the “Invitation”); (ii) the enactment of Article First of Law No. 4050/2012 (Government Gazette A 36/2012), “Rules on the modification of titles issued or guaranteed by the Greek State with the Bondholders’ agreement” (the “CAC Law”) and (iii) the statement by the Ministry of Finance of the Hellenic Republic on 21 February 2012 that the CAC Law can be used together with the PSI Agreement to achieve participation in the offer described in the Invitation at the levels anticipated by the 26 October 2011 Euro Summit Statement, constitute a Restructuring Credit Event in accordance with Section 4.7 of the 2003 ISDA Credit Derivatives Definitions (as amended by the 2009 ISDA Credit Derivatives Determinations Committees, Auction Settlement and Restructuring Supplement to the 2003 ISDA Credit Derivatives Definitions, published on July 14, 2009) because (i) a reduction in the amount of principal or premium payable at maturity or at scheduled redemption dates of the Designated Securities has been agreed between the Hellenic Republic and a sufficient number of holders of the Designated Securities to bind all holders of the Designated Securities and (ii) this agreement results directly or indirectly from a deterioration in the creditworthiness or financial condition of the Hellenic Republic? Links to publicly available information: http://www.bloomberg.com/news/2012-02-21/euro-area-finance-ministers-sta... http://mobile.reuters.com/article/article/idUSL5E8DK4UF20120221 http://www.consilium.europa.eu/homepage/showfocus?lang=en&focusID=80910 http://www.athensnews.gr/portal/11/53558 http://www.minfin.gr/portal/en/resource/contentObject/id/7ad6442f-1777-4... http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/1256... http://www.greekbonds.gr/
This is somewhat different query from the one currently being discussed, although both fundamentally address Section 4.7:
Does the announcement of the passage by the Greek parliament of legislation that approves the implementation of an exchange offer and vote providing for collective action clauses (“CACs”) that impose a “haircut amounting to 53.5%” (MINFIN Announcement, 2.21.2012) that “shall bind the entirety of the Bondholders [of eligible instruments]” (First Article, Section 9), constitute a Restructuring Credit Event in accordance with Section 4.7 of the 2003 ISDA Credit Derivatives Definitions (as amended by the 2009 ISDA Credit Derivatives Determinations Committees, Auction Settlement and Restructuring Supplement to the 2003 ISDA Credit Derivatives Definitions, published on July 14, 2009) because (i) the European Central Bank and National Central Banks benefitted from “a change in the ranking in priority of payment” as a result of the Hellenic Republic exclusively offering them the ability to exchange out of their “eligible instruments” prior to the exchange and implementation of the CACs, thereby effectively “causing the Subordination” of all remaining holders of eligible instruments, and (ii) this announcement results directly or indirectly from a deterioration in the creditworthiness or financial condition of the Hellenic Republic? Supporting Information: http://www.isda.org/uploadfiles/_docs/PAI_for_Issue_No_2012022401.pdf
Just how many more such requests can ISDA sustain before it comes out appearing like a manipulated, corrupt organization, dominated by banks (if also a few hedge funds), and finally caves first on Greece, then all the other countries (all of those where the ECB has bought bonds), where the ECB has subordinated creditors?
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I´ve been refreshing the ISDA page since around 11 CET to see if there is anything... Apparently it takes a couple of hours to formulate a properly bullshitty answer that basically says "No, a X% haircut is not a default".
" A 54 % Impairment would have constituted a default. So sorry, better luck next time."
Yeah....in fact....just stop asking.
I bet they never even looked at the contract, simply said "if we do they're fucked, so we won't. No credit event."
One day these cretins will see the light and simply buy gold. There is no better insurance from a default, and no one to decide if it is or it isn't a credit event...
come on. the whole CDS scam is just a political/financial milking scheme by the MegaBanks - BAN IT
ban it on the grounds that it is anti-capitalistic, if you really don't get the other reasons
Becasue government telling private banks what to do is so capitalist...
In a free market, we don't ban anything ... we just publicise and ostracise those who do the wrong thing and let those who made losing bets swallow their losses and collect whatever fractions of cents on the dollar that they can --- with NO bailouts of any description.
If the Greek government defaults, then all those who [stupidly] accepted bets that it wouldn't can brace themselves for an onslaught of angry punters. LOL.
CDS will continue to be a 'market' simply because all those hedge obsessed are too ashamed to admit that, just like all the rest of it, the rigged casino-model is a joke. The entire financial complex is a complete farce. What should be happening instead is mass exodus away from all the paper bullshit.
It's not whether it is a Credi Event, but rather whether it is a good idea for the panel to admit that it is...
same here; F5'ing like a mad monkey over here... either way it's gonna give a whol lot of shit!
Eventually it's a two-way answer; either it triggers the CDS or it doesn't; no matter how much they bullshit around it...
Exciting times...
Wow, those are hard questions.
Somebody's gonna need a bigger bonus.
does goldman want the CDS Credit Event to occur on or before March 20th and the CDS roll? That is probably the main question.
Think they're gonna hire that fat girl from Little Britain:
"yeah but no but yeah but no but anyway Greece was like sooo getting money and then Germany said France totally shagged Greece..."
"The computer says no..."
Bye bye CDS market. Hello risk premiums.
Whoever hold CDS "insurance"...:))) is totally FUCKED!
Yep. Which means those of you who are holding the CDS contracts thinking you're hedging your exposure, you're not. You're going to have to realize those losses on the haircuts.
Someone has to lose in this. Both sides can't win in a derivatives contract
clarification needed .......is this checkmate by the bond holders? If this isn't a trigger then who the hell would ever invest in toxic bonds?
whoohoo! it's there!
just out ... no credit event.
no CDS triggered! :')
Yeah but, I mean leaving aside the "determination".......how DO I get my money back, please? (Pretty please.)
ISDA just shot themselves in the head. Declared no credit event. CDS effectively worthless against sovereigns. EU asshats will celebrate until they see the yields on sovereign debt start climbing.
Nah, helicopter Ben will swoop in and buy all the bonds with printed FRNs to save the day, just like he is doing in the US. You just have to wonder how long this insanity can go on...
I can see the headline now: "Greece in Default, but Too Big To Fail Banks Rehypothicated Default Swaps, Holders Shit Out Luck
The anticipation is killing me. What will they decide?
I wonder, can one purchase a hedge against CDS failure?
There's probably a guy selling it somewhere... got a little table, three walnut shells, a pea.
nice to see you following this up tyler...they are going to keep throwing the curveballs at them. i am wondering if some committee members actually think that they are sufficiently hedged and dont see tail risk with a cds trigger. its like 12 men standing in a room all being asked to take a cut for the team in a true altruistic fashion but really most are pondering the alternate route,all out shoot em up which results in 10 men left standing and greece being held out to dry in the sun. their draw on the gunbis fastrcthanthe guy next tothem..they ill be right they are fully hedged.. just the weak ones will drop...are they really thinking that?