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ISDA May Reconsider Greek Swaps

Collective action clauses could mean another vote on whether swaps were triggered.

By Abigail Moses and Mary Childs, Bloomberg | Updated on March 02, 2012

Holders of credit-default swaps on Greek bonds shouldn’t tear up their contracts after yesterday’s ruling against a payout. The International Swaps & Derivatives Association said the swaps hadn’t been triggered by the European Central Bank’s exchange of Greek bonds for new securities exempt from losses taken by private investors. The group will now probably be asked to determine whether collective action clauses, or CACS, being used by Greece to impel investors to participate in a wider exchange of bonds that would trigger the swaps.

“They will have to enforce CACS,” said Alessandro Giansanti, a senior rates strategist at ING Groep NV in Amsterdam. “At that point the exchange will become coercive and that will be a restructuring event for CDS.”

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