THE INTERNATIONAl Swaps and Derivatives Association (ISDA) said it was asked to determine whether a “restructuring credit event” has occurred on credit-default swaps insuring Ireland’s government debt.

It’s the first time the trade group has been asked to make such a ruling on sovereign debt since an overhaul of the market in 2009.

The anonymous request cited Ireland’s bailout led by the International Monetary Fund, which may have made the Washington-based organization a preferred creditor, ISDA said on its website yesterday.

“The IMF certainly enjoys de facto preferential creditor status” and has claimed such a position “with regards to their loan to the Republic of Ireland”, the request on ISDA’s website said.

Ireland became the second nation after Greece to request an international rescue when it agreed an €85 billion bailout in November.

The net amount of default protection bought and sold on Irish government debt totalled $4.15 billion (€2.98 billion) as of March 4th, according to the Depository Trust and Clearing company.

Credit-default swaps protecting its debt have risen 4 per cent this month to 599 basis points, according to CMA.

The request for ISDA to consider whether a restructuring credit event occurred is the first on sovereign debt since the market adopted a single standard for settling trades in 2009, in a series of reforms known as the Big Bang and the Small Bang.

The changes created a committee of dealers and asset managers to make binding decisions such as when the contracts can be settled. Two voting members need to agree to consider any credit event requests for the process to move forward, according to ISDA.

Regulators in the US and Europe have been pushing for greater stability in the over-the-counter derivatives market after the collapse in September 2008 of Lehman Brothers Holdings Inc., one of the largest credit-default swap dealers. – (Bloomberg)