FIRST ON CNBC: CNBC TRANSCRIPT: INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION CEO ROBERT PICKEL SPEAKS WITH CNBC’S “CLOSING BELL” TODAY

WHEN: Today, Friday, March 9, 2012

WHERE: CNBC’s “Closing Bell

Following is the unofficial transcript of a FIRST ON CNBC interview with International Swaps and Derivatives Association CEO Robert Pickel on CNBC’s “Closing Bell." All references must be sourced to CNBC.

Video: ISDA CEO on Greece 'Credit Event'

BOB PISANI

: AS WE HAVE BEEN REPORTING, GREECE OFFICIALLY DEFAULTING AS EXPECTED. ISDA, THE INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, ANNOUNCING THAT GREECE'S RESTRUCTURING HAS TRIGGERED A CREDIT EVENT. AS YOU KNOW, THIS THREATENS THE CREDIBILITY OF THE OVERALL SOVEREIGN CDS MARKET. LET'S GET MORE ON THE STORY FROM THE MAN IN CHARGE AT ISDA, CHIEF EXECUTIVE ROBERT PICKLE. MR. PICKEL, THANKS VERY MUCH FOR JOINING US. YOUR OVERALL REACTION HERE TO THE DECLARATION YOU JUST ESSENTIALLY MADE, GIVE US SOME GUIDANCE ON WHERE WE GO FROM HERE.

ROBERT PICKEL: SURE. I THINK WHAT WE'VE DECIDED TODAY WAS SOMETHING WE HAD ANTICIPATED FOR QUITE A WHILE. AS THE GREEKS AND THEIR INVESTORS WENT THROUGH THIS DISCUSSION OF EXCHANGE IN THESE BONDS. IT WAS ONLY REALLY WHEN THE FORMAL OFFER WAS MADE TWO WEEKS AGO WITH THE INCLUSION OF THE COLLECTIVE ACTION CLAUSES THAT WE REALLY THOUGHT WE WOULD BE MOVING TOWARDS A DETERMINATION THAT THERE WAS A CREDIT EVENT IN THE CONTRACTS BETWEEN THE TWO PARTIES THAT UTILIZED THESE CDSs. THIS IS VERY MUCH IN MANY WAYS AN EXPECTED RESULT TODAY. BUT WE NEEDED TO GO THROUGH THE PROCESS AS REQUIRED BY THE TERMS OF THE CONTRACT AND AS REQUIRED BY THE LAW IN GREECE BEFORE WE COULD FORMALLY MAKE THAT DETERMINATION.

MARIA BARTIROMO: SO MR. PICKEL, LET'S GO THROUGH SORT OF WHERE WE GO FROM HERE, MARCH 19th IS THE EXPECTED AUCTION. HOW ARE YOU EXPECTING THAT TO PLAY OUT?

PICKEL: WELL, THE DETERMINATIONS COMMITTEE WILL CONTINUE – IN FACT, WE'LL MEET AGAIN ON MONDAY WHERE THEY WILL FURTHER CONSIDER THE OBLIGATIONS THAT WILL BE PRICED IN THAT AUCTION. NOW, OF COURSE, IT'S A LITTLE BIT COMPLICATED IN HERE IN THIS SITUATION WITH THE RESTRUCTURING, BECAUSE CERTAIN OBLIGATIONS BY VIRTUE OF THIS COLLECTIVE ACTION CLAUSE INVOCATION WILL EFFECTIVELY GO AWAY. WE NEED TO LOOK AT THE BONDS THAT ARE OUT THERE, OR POTENTIALLY EVEN THE PACKAGE THAT HAS BEEN OFFERED AS AN EXCHANGE. SO IT COULD BE THE INTERNATIONAL… BONDS, WHICH HAVE NOT BEEN SUBJECT TO A COLLECTIVE ACTION CLAUSE YET. IT COULD BE THE NEW BONDS THAT ARE RECEIVED IN EXCHANGE. OR IT COULD EVEN POTENTIALLY BE THE PACKAGE. AND THAT'S SOMETHING THAT THE DETERMINATIONS COMMITTEE WILL CONSIDER OVER THE COURSE OF THE DAY ON MONDAY.

BARTIROMO: IS IT FAIR TO SAY THAT GREECE'S DEFAULTING?

PICKEL: FOR OUR PURPOSES, WHAT WE DETERMINED IS IN THESE CONTRACTS BETWEEN TWO PARTIES, THIS DETERMINATIONS COMMITTEE, DECIDES WHETHER THE SO-CALLED CREDIT EVENTS ARE TRIGGERED BY THE FACTS AND CIRCUMSTANCES AS APPLIED TO THE CONTRACTUAL TERMS. AND SO THAT'S WHAT WE'VE DETERMINED. YES, OBVIOUSLY, IT IS IN A SITUATION WHERE THERE'S BEEN A DETERIORATION OF THE CREDITWORTHINESS OF THE UNDERLYING REFERENCE ENTITY, IN THIS CASE, GREECE, SO YOU KNOW PEOPLE WILL READ THAT AS TANTAMOUNT TO A DEFAULT. BUT WHAT OUR REAL FOCUS IS IS ON THE TERMS OF THE CONTRACT. AND MAKING SURE THAT THE PARTIES WHO ENTERED INTO THESE CONTRACTS CAN GET THE BENEFIT OF THEIR BARGAIN.

PISANI: MR. PICKEL, WHAT BOUT THE 4%OR SO THAT ARE NOT DRAWN INTO THIS, OR NOT FORCED IN, OR DIDN'T VOTE FOR IT? I KNOW YOU DIDN'T REPRESENT A LOT OF THAT GROUP, BUT CAN YOU JUST TALK TO US? BECAUSE A LOT OF PEOPLE ARE WONDERING, IS THIS GOING TO BE SOME KIND OF CLOUD? WILL GREECE BE ABLE TO PAY THEM OFF? WHAT STRATEGIES ARE AVAILABLE HERE?

PICKEL: YOU KNOW, I THINK THAT'S REALLY A QUESTION BEST DIRECTED TO THE GREEK GOVERNMENT. WHETHER THEY INTEND TO PAY THOSE OFF. WHAT'S IMPORTANT, THOUGH, IS ANY OF THOSE 4% THAT HAVE NOT TENDERED INTO THIS AUCTION, OR TENDERED INTO THIS EXCHANGE, WILL GET THE BENEFIT OF ANY CDS THAT THEY HAVE OUTSTANDING. BECAUSE WE'LL MOVE FORWARD WITH AN AUCTION ON ALL OBLIGATIONS. ONCE THERE'S A CREDIT EVENT THAT'S TRIGGERED, IT'S NOT SPECIFIC TO AN OBLIGATION IT’S MORE GENERAL AS TO THE REFERENCE ENTITY. ANYBODY WHO HOLDS ANY OF THOSE BONDS, AND HAS CREDIT DEFAULT SWAP PROTECTION, WILL BE ABLE TO BE MADE WHOLE ON THEIR CDS. AND THEN THEY JUST HAVE TO PURSUE WHATEVER THEIR REMEDIES MAY BE AGAINST THE GREEK GOVERNMENT ON THE UNDERLYING DEBT.

BARTIROMO: WHAT DO YOU THINK THIS TELLS US ABOUT THE OTHER SOVEREIGNS OUT THERE, IN TERMS OF THE CREDIBILITY OF THE CDSs OF THE LIKES OF SPAIN, PORTUGAL, ITALY, ET CETERA?

PICKEL: I THINK WHEN PEOPLE ENTER INTO THESE CONTRACTS, YOU KNOW, SOVEREIGN ISSUES ARE ALWAYS QUITE DIFFERENT FROM CORPORATE ISSUES. YOU'RE DEALING WITH AN OBLIGOR WHO ACTUALLY HAS THE POWER IN MANY CASES TO CHANGE THE UNDERLYING TERMS OF THE CONTRACT. NOW, THERE'S BEEN MUCH MORE OF A MOVEMENT TOWARDS HAVING INTERNATIONAL LAW, GOVERNING BOND ISSUES BY SOVEREIGNS, AND ALSO TO INCLUDE COLLECTIVE ACTION CLAUSES UP FRONT. SO THERE'S MUCH MORE OF AN ESTABLISHED PROCESS. WHAT WE SAW HERE IS A CIRCUMSTANCE WHERE GREECE INCLUDED THE COLLECTIVE ACTION CLAUSES AFTER THE FACT AND SUBSEQUENTLY TRIGGERED THEM. THAT'S QUITE DIFFERENT CERTAINLY FROM THE NORMAL CORPORATE SITUATION, AND EVEN MANY SOVEREIGN SITUATIONS AS WELL.

BARTIROMO: AND IS $3 BILLION THE TOTAL NET OUTSTANDING?

PICKEL: THAT IS THE TOTAL NET OUTSTANDING AS WE KNOW FROM THE INFORMATION THAT'S BEEN REPORTED FOR SEVERAL YEARS BY THE DEPOSITORY TRUST AND CLEARING CORPORATION. IT'S IMPORTANT TO KEEP IN MIND WHEN WE FIRST STARTED TALKING ABOUT THIS SERIOUSLY LAST SUMMER, IT WAS IN EXCESS OF $5 BILLION NET. BUT THROUGH PROCESSES THAT THE INDUSTRY HAS ESTABLISHED TO TEAR UP TRADES, COMPRESS OUTSTANDING ACTIVITY, WE'VE ACTUALLY SEEN THAT NUMBER OBVIOUSLY GO DOWN TO $3.2 BILLION. AND WE EXPECT THAT FOLLOWING THE AUCTION ON MARCH 19th, THAT THIS WILL ALL SETTLE IN A VERY ORDERLY MANNER.

PISANI: MR. PICKEL CAN YOU STEP BACK A LITTLE BIT AND GIVE US A 10,000-FOOT VIEW FROM HERE? WHAT HAVE WE ALL LEARNED FROM THIS? THIS IS THE FIRST MAJOR DEFAULT SINCE WORLD WAR II OF A SOVEREIGN COUNTRY. WHAT HAVE YOU LEARNED FROM THIS WHOLE PROCESS? WHAT SHOULD WE ALL HAVE TAKEN AWAY FROM THIS? CAN YOU STEP BACK A LITTLE BIT FOR US?

PICKEL: I GUESS WE HEARKEN BACK ALWAYS -- WHAT WE'VE DONE AS ISDA OVER THE LAST 25 YEARS OR MORE, HAVE PUT IN PLACE DOCUMENTATION TO GOVERN MANY DIFFERENT TYPES OF TRANSACTIONS, INCLUDING CREDIT DERIVATIVES, AND SO THE FIRST PLACE TO -- THE FIRST AND LAST PLACE REALLY TO STOP ARE THE DEFINITIONS, THE TERMS OF THE CONTRACT. AND UNDERSTAND, YOU KNOW, WHAT THOSE TERMS ARE, AND UNDERSTAND WHAT THE FACTS ARE AS APPLIED TO THOSE TERMS. AND I THINK THAT'S WHAT WE'VE CERTAINLY BEEN TALKING ABOUT FOR THE PAST, ALMOST NINE MONTHS. LOOK AT THE CONTRACT, UNDERSTAND THE TERMS. IT'S NOT THE -- IT'S NOT THE QUESTION OF HOW MUCH AN OBLIGATION MAY BE WRITTEN DOWN, IT'S A QUESTION OF, IS IT BINDING ON ALL HOLDERS IN THE CASE OF A RESTRUCTURING OR FAILURE TO PAY? HAS THERE BEEN A FAILURE TO PAY. OF COURSE, THERE'S NOT BEEN THAT AS OF YET. BUT THERE WAS IMMINENTLY GOING -- THAT WAS GOING TO HAPPEN ON MARCH 20th, BUT FOR THIS RESTRUCTURING.

BARTIROMO: LET'S TALK MORE ABOUT THAT. AS ONE OF OUR COLLEAGUES MENTIONED EARLIER, IT'S NOT NECESSARILY JUST THIS NEXT MARCH 20th DEADLINE THAT WE'RE LOOKING AT IN TERMS OF GREECE, BUT THE FOLLOWING PAYOUTS. AND MAKING THE PAYMENTS THERE. ARE YOU EXPECTING THAT WE WILL SEE FURTHER DEFAULTS?

PICKEL: REALLY HARD TO SAY. YOU KNOW, I THINK PEOPLE -- OTHER SOVEREIGNS MAY OBSERVE THIS SITUATION AND CONSIDER WHETHER TO THE EXTENT THEY HAVE LAWS GOVERNED BY THEIR OWN DOMESTIC -- BONDS GOVERNED BY THEIR OWN DOMESTIC LAW, THAT THEY SHOULD LOOK AT INCLUDING THESE COLLECTIVE ACTION CLAUSES TO TRY TO RESTRUCTURE ON A, QUOTE UNQUOTE, VOLUNTARY BASIS. WE'LL JUST HAVE TO SEE HOW THAT DEVELOPS. WHAT'S IMPORTANT TO US, WE FOLLOW THE TERMS OF THE CONTRACT. WE'VE GOTTEN TO THIS POINT IN TIME THAT BASED ON THE FACTS AND CIRCUMSTANCES AND BASED ON THE UNDERLYING DOCUMENT, WE'VE GOTTEN TO THE CONCLUSION THAT I THINK WE AT LEAST, AND I THINK VIRTUALLY ALL THE MARKET PARTICIPANTS, FULLY EXPECTED TO HAPPEN.

PISANI: WHAT DO YOU SAY TO COUNTRIES THAT ARE CONSIDERING COLLECTIVE ACTION CLAUSES? WHAT ADVICE WOULD YOU GIVE THEM?

PICKEL: I WOULD GIVE -- MY ADVICE WOULD BE THAT, CREDITORS ARE PART OF THE FABRIC OF THE CREDIT MARKETS THESE DAYS. AND I WOULD URGE THEM TO BE MINDFUL OF THAT. AND I WOULDN'T BE CONCERNED ABOUT -- EARLIER ON, THERE WAS A LOT OF CONCERN ABOUT WE SHOULDN'T TRIGGER THE CDS. IN FACT, MAKE YOUR DECISIONS IN A WAY THAT MAKE SENSE FOR THE COUNTRY, AND ALLOW THE CDS MARKET TO FUNCTION AS IT IS INTENDED TO DO AND DON'T DO END RUNS AROUND THE CDS MARKET.

BARTIROMO: MR. PICKEL, THANK YOU VERY MUCH FOR JOINING US. WE APPRECIATE IT.

PICKEL: THANK YOU.

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