With Greece in default, what will happen with the CDS writers?

Greece has defaulted, not only de facto, but also officially, as ruled by multiple financial agencies such as Moody's. After the credit and financial derivatives party up until 2008, somebody is doing what they are supposed to do. The statement:

 "According to Moody's definitions, this exchange represents a 'distressed exchange,' and therefore a debt default," the US rating firm said. "This is because (i) the exchange amounts to a diminished financial obligation relative to the original obligation, and (ii) the exchange has the effect of allowing Greece to avoid payment default in the future."

Remember that Greece has forced its creditors to swap near-term maturing debt by debt maturing in the middle of the next decade. But the most important financial agency in this regard is the International Swaps and Derivatives Association (ISDA), whose role is to decide whether the CDS sold by banks and insurers must be triggered, this is, used by their counterparties (who bought them as protection against Greece's default) to minimize losses on this event.

The International Swaps and Derivatives Association determined today that Greece's bond swap has triggered a credit event. That will lead to payouts of credit default swaps—essentially, securities contracts on holdings of Greek bonds—that investors purchased to hedge against the risk of holding Greek sovereign debt.

Where do we stand? Given that the CDS business has been such a ludicrous business for the sellers, will it be today the day they will have to give up all the succulent profits they made over the past decade? We remember the bankruptcy of MF Global did not carry a decision to activate the corresponding insurance, forcing a bankruptcy wave on the insurance holders. Is this the reason why the central banks have released such a huge liquidity over the past months? We will certainly be watching the ECB's deposit facility.