03/01/2012 08:26 EST | Updated 05/01/2012 05:12 EDT

Dealers' panel says Greek restructuring agreement is not yet a credit event

FRANKFURT - The restructuring of Greece's government debt is not yet a credit event, a panel convened by a derivatives market trade organization said Thursday.

A ruling of a credit event would have meant that bondholders who hold credit-default swaps — complex financial products that act as insurance against default — would have been paid off.

The ruling by the committee convened by the International Swaps and Derivatives Association, meeting in New York and London, said however the Greek bond deal is still being carried out and that the question could come up again.

Greece and its bondholders agreed on a debt swap that will give investors new debt worth only 53.5 per cent of the face value of their former holdings.

The panel had been asked to rule whether the bond swap agreement itself constituted an event that meant creditors' derivatives insurance should pay off. It was also asked to rule on a bond swap carried out between Greece and the European Central Bank ahead of the creditor swap.

The ECB got new bonds that were not subject to the agreed writedown, sparing it any losses. The panel had been asked to rule whether private credit holders had been subjected to a forced subordination of their holdings. Subordination means someone else gets paid ahead of you, meaning you are less likely to see any money if the debt has trouble repaying.

There has been concern that triggering of credit default swaps could unsettle financial markets or mean losses for the firms that sold them. However, analysts say that most swaps issuers appear to have hedged their risks, meaning the net payout would be relatively small.