Greece CDS: trigger happy | FT Alphaville

Greece CDS: trigger happy

Jeez, guys, look, there’s going to be a credit event that triggers Greece CDS, ok? Or, at least, it seems highly likely. So, take a chill pill.

What, you don’t want to? Instead you want to submit another request to the Isda Determinations Committee to try to trigger the contracts? Fine, have it your way (click to expand):

The earlier request, that will be heard and voted on by the Isda DC today, is about whether the effective subordination of Greek bonds to the ones that the ECB/EIB holds counts as a restructuring.

Here’s the cut down version of the new request:

Does (i) … (the “PSI Agreement”) … (ii) the enactment of … (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 …, constitute a Restructuring Credit Event…

Just a guess here, but this one seems to be on thin ice. It relies on a “statement” by the Ministry of Finance. Submitted as evidence is a link to a press release from the Ministry, which states the following in a bigger announcement of the PSI:

If passed, this law will be available to be used in the implementation of the PSI transaction if necessary to achieve participation at the levels anticipated by the 26 October 2011 Euro Summit Statement.

“Will be available” does not mean “will definitely use”. This looks more like a threat than something that is strictly forced, hence no dice for a trigger. Of course, it’s widely anticipated that the CAC will be used, but it’s hardly something that one can classify as a certainty.

Related links:
Will the Greece CDS auction be ‘fair’? Part 1, Part 2 – FT Alphaville
Market prepares for Greek CDS trigger – IFR
Greek auction result could undermine CDS use – Risk
How do credit event auctions work? [Series] – FT Alphaville