Private holders of Greek debt will suffer losses up to 73% of their holdings. Those holdings are usually insured against loss. Because of the ISDA's decision, those "haircut" losses suffered by holders of Greek sovereign bonds would not now (so far) be covered by any financial instruments which those bondholders might have purchased to insure their holdings against Greek default on their sovereign debt. Bonds are often insured against default by credit default swaps (CDSs) and other over the counter (OTC) financial derivatives.
The usefulness of trillions of dollars worth of derivatives for bond insurance purposes is now in question. The financial cross-agreements are very complex, and the situation might change, but for now, it has been determined that there has been no "credit event" which justifies insurance, in spite of the apparently unavoidable losses inflicted upon bondholders by Greece's failure to honour their bond obligations.
The inability to rely upon CDSs to insure sovereign debt will make it more difficult for Italy, Portugal and other nations to rollover their existing debt, or to issue new debt.
The likely solution to the global debt crisis would be prolonged CDS and OTC litigation while debt is deflated away by massive quantitative easing (QE) during the next one to five years. The likely consequence will be massive inflation after money circulation resumes, which it inevitably must. Neither negative sentiment nor positive sentiment can be permanent. Collective human nature creates permanent cycles between the two extremes.
See the Financial Times' "No insurance pay-out on Greek debt".
See the vote results at the ISDA's Determinations Committee Decision.