Greece bond protection pays out $2.89 bln after swap

The CDS payments make up the difference between the recovery rate of 21.50 euro cents determined at an auction to set the value of new Greek bonds and the full face value of Greek debt.

Greece's debt swap aimed to cut the Hellenic Republic's debt by 100 billion euros, the largest sovereign restructuring in history. It aims to reduce the debt from 160% of its annual economic output to 120 percent by 2020.

The International Swaps and Derivatives Association said on March 9 that the decision by its EMEA (Europe, Middle East, Africa) Determinations Committee to declare a credit event that triggered the payouts was unanimous.

ISDA said its decision was based on Greece's use of collective action clauses to amend the law governing terms of government-issued bonds "such that the right of all holders of the Affected Bonds to receive payments has been reduced."

Collective action clauses are rules governing bond agreements whereby a certain majority of bondholders can force a minority to accept terms of a restructuring or swap.

The retroactive inclusion of CACs meant the losses were forced on all investors holding bonds governed by Greek law.

Greece's finance ministry said creditors tendered 85.8% of the 177 billion euros in bonds regulated by Greek law. This would reach 95.7% of all privately-held Greek debt with the use of CACs to enforce the deal on creditors who refused to take part voluntarily.

Greece's debt restructuring cleared the way for a 130 billion euro rescue from the euro zone.

Transfer of the CDS payout to investors occurred March 26, DTCC said in its statement.