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Reply #13: Why Not Pull the Trigger on Greek Default Swaps? [View All]

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xchrom Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Nov-25-11 07:45 AM
Response to Reply #7
13. Why Not Pull the Trigger on Greek Default Swaps? /

The question about why credit-default swaps written on Greek debt will not be triggered by the voluntary exchange of private debt that is in the works has been the subject of much recent commentary but little deep analysis.

The basic question is, why not trigger the swaps? And why do some think that the swaps are not apt to be triggered if bondholders hold out and refuse to exchange?

In a corporate exchange offer, you would suspect that the exchange was being done with exit consents. These get the departing bondholders to agree to strip out all the possible default triggers (other than pure failure to pay), making it less likely that a swap would be triggered going forward.

But with sovereign debt, such bonds are not apt to have many of those covenants anyway.
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