The International Swaps and Derivatives Association (ISDA) determined that a “credit event” has not yet taken place on Greek debt. While S&P has stated that Greece is in “selective default” on its debt, the credit rating agencies’ opinions are irrelevant. What does matters is the opinion of the ISDA, and its definitions of what constitutes a credit event are very specific.
The simple passage of the Greek law on the collective action clauses (a type of “cram down” provision whereby if more than half of private sector bond holders agree to the debt exchange, it gets forced upon any holdouts) and the exemption of the European Central Bank (ECB) from having to participate in a debt swap does not meet the definition of a credit event. In my opinion, the reason is relatively straightforward: these events may increase the likelihood of a coerced bond exchange (which would likely be a credit event), but that hasn’t happened yet. The ISDA will only decree that a credit event has occurred once the event has already happened, not before it happens.