can reduce the risk of be deemed in default

European leaders discuss a solution to involve private investors in a second rescue of the Greece. Two camps collide: the European Central Bank (ECB) is partisan of a soft line towards the creditors, the idea to avoid any "credit event". The Germany (but also the Netherlands and the Finland) advocate a tougher line, which would go beyond a simple would be to reward those who have bet against the Greece.

To date, there is still no certainty about the implications of such solution. Reading the comments of the agencies and the Isda, we can however fear that even a scenario based on a voluntary commitment of investors is considered as a credit event. These complexities make the difficult decision of leaders.

Moody's said its position. "The initiatives on the model of Vienna are assumed to be truly voluntary: our job is to verify that this is the case and if we discover that there is a binding dimension, then we consider that there is failure.". And the Agency to continue: "Constraint ..." If the creditor thinks that interruption of loans or non of their maturities, a failure would occur.

Standard & Poor's and Fitch have explained their methodology. The two agencies have recalled their general definition of a defect: it is an event that occurs when the new terms available to the creditor are less advantageous than the former. This is the case of an extension of mature or subordination of old titles to the new.

This deterioration is counterbalanced by an increase of the coupon, a "collateral" guarantee, etc., can reduce the risk of be deemed in default.

The two agencies insist that a "voluntary" said Exchange is not absolute protection. They check that the situation of the debtor is not "tense". Fitch looks as if the Exchange is not motivated by a risk of insolvency or illiquidity. Finally, the degree of coercion, even implicit, is taken into account: S & P believes that, if it is suggested that it will be worse more later to force the hand of the creditors, there is coercion. Fitch also verifies that holders are not penalized if they do not participate in the Exchange.

Isda explained to Reuters its general definition of credit events. The "churn" of the debt by creditors is a credit event if the debt is not repaid on the due date and that it extends. But if there is an exchange of securities, with first a repayment of obligations and then issuing new bonds - even with different conditions - there is "generally" not credit event, said the Isda. "Under a contract be amended so that there is an event", says the association. For a more hard but voluntary restructuring, which would be for example to change the coupon, principal, etc., it is well a credit event, since it changes the terms of the contract.

Isda also recalled that his "Committee" is not influenced by the rating agencies. This Committee looks at the most if the agencies believe that there is a degradation of the conditions for the creditors.

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