No insurance pay-out on Greek debt Billions of dollars in credit default insurance will not be paid out to investors in Greek debt, an industry body has ruled, turning down two requests for a pay-out to be triggered over a debt swap. The International Swaps and Derivatives Association decided there had not been a credit event yet in Greece ahead of next week's €206bn debt swap but left the door open for a different decision in the future. The body's determinations committee rejected requests it declare a credit event on grounds that the European Central Bank was being given de facto seniority in a controversial debt swap and that Greece was introducing legislation that would require any recalcitrant bondholders to take part in the swap should support for the deal pass a certain level. However, the ISDA committee said: "The situation in the Hellenic Republic is still evolving and today's EMEA DC decisions do not affect the right or ability of market participants to submit further questions to the EMEA DC relating to the Hellenic Republic nor is it an expression of the EMEA DC's view as to whether a credit event could occur at a later date, in each case, as further facts come to light." The question of whether Greece's debt restructuring would trigger a credit event has sparked intense debate about the value of the fledgling CDS market. The Greek debt swap has been structured as a voluntary deal, in part to avoid triggering CDS. But in recent months as Greece's financial situation has deteriorated rapidly it has become clear that all of its bonds held by private investors need to be included in the swap to help bring its debt burden down meaningfully. To guarantee full participation, Greece has retroactively inserted collective action clauses into its existing bonds. These CACs allow a decision of a two-thirds majority to bind all bondholders, meaning that any holdouts would be included in the swap. But ISDA rules say that exercising a CAC normally creates a credit event. Sovereign CDS have been used by banks to hedge their exposures to a number of countries" bonds as well as by other investors wanting to bet on the chances of Greece defaulting. But there have been growing fears that the convoluted nature of the Greek debt swap might not trigger a credit event and could therefore make sovereign CDS worthless. The value of net CDS outstanding on Greece has collapsed in recent months amid these fears, and stands at $3.2bn, down by more than 90 per cent from its peak. The determinations committee of ISDA, which decides on whether a credit event has occurred, is dominated by banks taking part in the debt swap, raising questions about its impartiality. BNP Paribas, Deutsche Bank and Société Générale are among the 10 banks on the panel along with five asset managers. ISDA has already received two questions about whether Greece has triggered a credit event. The first deals with whether the ECB's side deal to insulate its bond holdings from a debt swap has subordinated other bondholders. The second, which was lodged on Thursday just before ISDA met to determine the first, relates to the CACs law itself. The rush to file requests ahead of the debt swap - which will close next week at the earliest - reflects anxiety among some CDS holders about when a credit event would be declared. If it is declared now, the auction to decide how much money CDS holders would receive would be based on current Greek bonds. The fear of some in the market is that if a credit event is declared after the bond swap, the current Greek bonds will have disappeared and will be replaced by new debt which could have a lower value. That would potentially reduce how much money they could recover. Greek CDS has long been trading at highly distressed levels, and now trades at levels suggesting a large default is all but certain. Investors currently wishing to insure $10m of debt over five years have to pay $7.3m up front and $100,000 annually there after.