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Greece Default Is Official; Insurance Payouts Triggered

CNBC [1]
Friday, March 9, 2012

A group representing dealers in credit default swaps decided Friday that Greek’s bond swap constitutes a “credit event” that entitles holders of Greek credit default swaps to compensation.

The “yes” vote by the International Swaps and Derivatives Association triggers roughly $3.2 billion in CDS, which are insurance policies that pay out if a bond issuer defaults. That amount is actually much smaller than many had feared.

The decision was widely expected, and stocks were slightly down after the announcement.

Greece pushed through a bond swap deal on Friday, forcing bond holders to take a significant “haircut” on the return of their money. The swap was approved by about 84 percent of the holders, and Greece is moving to activate a rule forcing the rest of the bondholders to go along with the deal.

Full story here.