Greece won’t pay debt: Greece IMF Debt

Published: June 30, 2015

Greece won’t pay debt: Greece IMF Debt, Analysts and traders see little chance that Greece’s failure to pay $1.7 billion to the International Monetary Fund will trigger payouts on credit-default swaps.

The derivatives insuring Greek sovereign debt won’t cause a failure-to-pay credit event because the IMF loan is a bilateral agreement and doesn’t prompt cross defaults on government bonds, according to Royal Bank of Scotland Group Plc. The IMF loan is also excluded from swaps coverage because it predates a 2012 cutoff, according to JPMorgan Chase & Co. and Barclays Plc.

Greece’s government said it won’t make the payment owed to the IMF today and it’s preparing to exit the protection of Europe’s bailout regime at midnight. Investors are more concerned that the country may leave the euro after a July 5 vote on whether to accept the demands of its creditors and that it will be unable to make bond payments due later that month.

“The IMF payment will be missed but it is not as urgent as people think as it does not trigger bankruptcy” said Louis Gargour, CIO of London based LNG Capital, an alternative investment management firm. “What’s more interesting is that the country does not have sufficient liquidity to make bilateral and external debt payments next month and that constitutes default and will trigger CDS contracts.”

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