Greece triggered the payment on default insurance contracts by using legislation that forces losses on all private creditors, the International Swaps and Derivatives Association said on Friday.
Greece said it would use this legislation, known as a collective action clause, to force private creditors into a bond swap. This follows creditors' voluntary tendering of 85.8 percent of the 177 billion euros in bonds regulated by Greek law. The use of CACs should boost participation to 95.7 percent.
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The ruling means a maximum of $3.16 billion of net outstanding Greek credit default swap contracts could be paid out, though the actual amount is likely to be lower because bondholders do not lose all their original investment.
The payout is not immediate and the exact amount of money changing hands will be determined by an auction procedure which is expected to take place in the coming weeks.