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The French Banks Are The First To Accept a Voluntary Greek Restructuring
As outlined in explicit detail last week in the post The Anatomy of a Serial European Banking Collapse, French banks (and by extension, France itself) risk outright financial collapse if the Greek situtation progresses in its current direction. Of course, armed with said knowledge, there is no surprise that the French are the first to blink. From CNBC: Sarkozy Confirms Greek Debt Deal With French Banks:
French banks, among the most exposed to the Greek debt crisis, have reached an outline agreement to roll over holdings of maturing Greek bonds, part of a wider European plan to avoid sovereign default.
Immediately after French President Nicolas Sarkozy announced the breakthrough, German bankers voiced their interest in the "French model."
Of course they are, because right after the French, the Germans are next in line for the capital gutting experience of this generation as a result of binging on profligate debt. As a matter of fact, the German banks will most likely be very open to the ideas that Ireland may be floating right about now - and Ireland's goverment will probably push a harder bargain than Greece's.
The news came as international bankers met euro zone policymakers in Rome to discuss how the private sector can share the burden of a second rescue programme for Greece.
Sarkozy told a Paris news conference that French banks would be offered 30-year Greek bonds with a coupon equivalent to the euro zone's lending rate to Athens, plus a premium based on Greece's future economic growth rate.
European Union leaders agreed last week that extra public financing to help Greece avoid bankrupcty would depend on the voluntary involvement of private sector bondholders in a way that did not cause a "credit event" and that credit ratings agencies did not brand as a selective default.
A French banking source said on Sunday the French Treasury had reached a deal with banks to make a rollover more palatable to creditors, who would reinvest 70 percent of maturing debt in the 30-year Greek bonds, of which 20 percent would go into a zero-coupon guaranteed bond based on high-growth stocks.
Whoa! That's a mouthful (figuratively andl literally). Let's see here... The lenders will reinvest 70% of maturing debt, which will allow them to derisk 30% of the current investment and get it back. But if the Greek bonds are currently trading at 50 cents or so on the dollar and the Greeks don't have the money to make good on the maturing bonds, then the investors are basically buying calls on the 70% they are leaving on the table. Those calls are coming in the form of a rather structured investment in and of itself- "who would reinvest 70 percent of maturing debt in the 30-year Greek bonds, of which 20 percent would go into a zero-coupon guaranteed bond based on high-growth stocks."
The risk on new long maturity bonds that still have signfiicant default risk may very well be worse than taking your medicine right now and calling it a day. Remember, an IMF bailout (3rd or so, but who keeps count anymore) is part and parcel to this deal. Everytime the IMF steps in, they issue payday loan terms (you know, like in the US urban ghettos and housing projects), except unlike the pay day loan sharks guys who simply take two pound of flesh and allow you to waste the balance of your paycheck accordingly, the IMF takes 3 pounds of dermis and then proceeds to instruct you on how and with whom you can engage the balance.
So, if by the 3rd IMF bailout there are still some investors left (and according to this newsflash above, there will still be some - albeit with only 70% of thier skin in the game to be cut off by the IMF) in the case of default the IMF has 3 rounds of subordination that it has forced on existing and new investors. Remember, the IMF gets paid first, unlike the EU/ECB. Since we should all agree that there is naught but faery dust and pixie vapors backing much of these fiat currency based bonds out of Greece (see Greece Reports: "Circular Reasoning Works Because Circular Reasoning Works" - Or - Here Comes That Default!!!), if one were to assume a Lehman style recovery (ex. 6 cents or so on the dollar) and the new bonds end up trading in the same range as the "to be rolled over bonds" (ex. 52 cents or so on the dollar), then the ECB, a mutitude of private banks, pension funds and insurances companies can all get into a drawn out fistfight over those 3 pennies the IMF may let through the net! Reference LGD 100+: What's the Possibility of Certain European Banks Having a Loss Given Default Approaching 100%?
As illustrated above, there is a higher probability for a Greek sovereign debt restructuring in 2013, which will definitely not hurt IMF (since it has a preferred right) but the Euro Members and other investors who will be holding the Greek debt.
What is guaranteed to be interesting is what happens if I (and many traders and strategists that I speak to) turn out to be correct and that global equity markets will continue to be on a slide as we pay the piper for the transgressions we failed to address in 2008. Well then, equity and fixed income investments take a big hit - and those new structured Greek bonds mentioned above get sacked, and then defaulted on.
Will the Irish and Portguese follow suit in issuing structured products in lieu of paying their debt in cash? There's nothing like taking 30 cents on the dollar of an invesment gone bad to the tune of 50 cents and investing the balance into an equity markets of an economy that is about to go into a recessionary spiral. Of course, there's still that additional default risk thingy. Can you imagine the losses building up on the ECB's books?
I can still here it. Can you??? Click, Clack, Click: The Sound of Fallining Dominoes. Just think of each pool table as a major contient (Europe, Asia, North America, etc.)
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"For Sale: French rifle, never used and only dropped once"
This one is getting old dickhead. During the May-June 1940 German offensive over France nearly 100 000 French soldiers died. The U.S. being 4 times more populated than France that equals to 400 000 U.S. casualties... exactly the amount of Yank troops killed during the entire WWII. Still sounds like a bunch of sissies running for cover?
French troops fought bravely but they had WWI gear and WWI strategy.
And you don't have anything to say about Brit troops fleeing (like rats?) the French soil at Dunkerque? Or maybe you've never heard of that part of the 1940 chapter of WWII?
That doesn't equal 400,000 American lives shitdick. Considering it was YOUR country it shouldn't have cost ANY American lives.
Only 70 years old...
In this US driven world, propagandists are clinging to propaganda against facts old by 200 years. US propagandists for example still claim they have stolen an entire continent from the Indians.
Etc...
US citizens have never been afraid of facts.
"Balcermustgo" great story :-) ! (Moral of the story) See how much a town can get done without interference from the gubermint.
www.piigs.debt.patrz.pl
It's a slow day in a little East Texas town. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.....
On this particular day a rich tourist from back east is driving
Through town. He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.
As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.
The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner.
The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.
At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.
No one produced anything. No one earned anything.
However, the whole town is now out of debt and now looks to the future with a lot more optimism.
Not that I didn't like your story, but the premise that no one produced anything is wrong. Everyone produced something for that $100 dollars, they just did it on credit.
How does this not trigger CDS's ?
I do believe it does.
Bend over and see.
Don't know, but one thing is certain; a lot of lawyers will be arguing both sides of this issue long after the actual event.
This is a way for IMF to give French banks 50 percent of their exposure paid off up front. Their remaining exposure I only half of what they have today. Banks mak out better than IMF or greece
that's assuming the Popaparasite family actually manage to implement the (any!) Austerity Plan and don't get chased down the street and skinned!
"Waiter, there's a fly in my yoghurt!"
Gives new meaning to French Surrender Monkeys.
This turd porridge is the best Lagarde can come up with? Sacrebleu.
"Can you imagine the losses building up on the ECB's books?"
Jean-Claude Trichet is/was a financial genius, why ever is the senile starry-eyed ancient Euro idealogue inept windbag retiring?!!!
It's a perfect CV for the IMF surely? ..can't be much worse than Christine Lagarde whose tennure includes French Govt books so bankrupt they had to raid/rape French public pensions for short term cash flow, awesome financial planning!
...this is looking very good, supersize my popcorn it's going to be a marathon mega-circle-jerk liquidation Euro Party
on Sat, 06/25/2011 - 13:56
#1401225
We should comb Reggie's archives. I would not be surprised if France is too. France is the Pig no one is discussing.
Just like the situation with the EU banks, your post formatting is all fucked up.
Dunno who junked you for that...Reggie definitely has a schizoid relationship with layout and typeface.
Probably some fucktard shill.
His formatting was fucked, but his message and research was right on muther fucking point.
Exposure and not even the good kind...
For Sale: French rifle, never used and only dropped once.
For sale : ignorant and full retarded yankees who make the same old stupid comment over and over again because they won one and only war in 1945 while France has a 1500 years old war winning history...
Won one war? WWI, WWII... Yep, just one.
Propagandists have been failing to renew their propaganda sometimes for one hundred of years or more...
So why bother about something that is only old by 60 years?
If Napoleon did his job right, perhaps Nathan Rothschild and their banking empire would not have the world by the balls today.
No matter how many times I hear that joke it makes me laugh.