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Le Figaro Reports French Banks Propose "Voluntary" 30 Year Debt Rollover, However With DOAing 30%-50% Implied Haircut
The latest episode in the "we'll make it up as we go along" rescue of the Euro comes from France where as Le Figaro reports, a working group of French banks led by BNP Paribas has proposed, and been agreed to by the French Treasury, that maturing debt would be rolled over into a a 30 year maturity piece, accounting for 50% of the total existing debt, and another 20% would go into a "zero coupon" fund focused on high quality stocks. Also according to Le Figaro, borrowings under the proposed scheme would pay an interest equivalent to what Greek "public" interest is plus a variable interest rate "likely to be linked to an economic Greek indicator such as GDP" (which being negative for years will likely means lower interest than prevailing).
Of course the problem with this proposal for anyone who can do simple math, is that the implied haircut for the Greek Treasury would be between 30% and 50%, depending on how one accounts for the treatment of the sinking stock market ponzi fund. But certainly at least 30% of the rolling over debt would not come back to the issuing authority. And since French banks are unaware of simple rating agency methodology, any debt exchange, whether called "voluntary" or otherwise, which involves a notional haircut of any variety is an immediate event of default. As a reminder, avoiding a rating agency EOD, far more than an ISDA CDS trigger determination, is what this whole charade is all about. Since an EOD would mean Greek debt becomes ineligible in any capacity for ECB collateralization, and since there are likely hundreds of billions in Greek sovereign debt pledged to the ECB either directly, or indirectly, through Greek banks, this funding avenue closure would commence the waterfall that triggers the liquidity cascade that culminate with every single European money market fund breaking the buck as has been discussed previously.
As such, this latest proposal is also Dead On Arrival.
Elsewhere, Germany was making more noise, claiming the "voluntary" bailout would be agreed upon by everyone "or else" and that Greece would be doing the worst thing possible if it were to not accept the generous terms of the second Greek bailout which is now bigger than the first one.
From Reuters:
Greece accepted a package of 110 billion euros of EU/IMF loans in May 2010 but now needs a second bailout of a similar size to meet its financial obligations until the end of 2014, when it hopes to return to capital markets for funding.
Euro zone finance ministers have said they will define by early July "the main parameters" of a new international bailout plan.
German Finance Minister Wolfgang Schaeuble told Bild am Sonntag he expected private sector creditors to participate willingly in a second bailout package, underlining also that Greece would not receive the next aid tranche if the government's austerity plans were vetoed.
The Greek parliament is due to vote on Wednesday and Thursday on measures that include 6.5 billion euros of extra austerity steps for this year and savings of 22 billion euros for 2012-2015 to cut deficits and keep qualifying for EU/IMF aid.
What Schaeuble forgot to add is that the only real loser in this deal would be Germany, as a Greek "No" vote would beging the process of EUR dissolution, also meaning the DEM would make its long overdue comeback, which in turn would force Germany exports to surge in price courtesy of a revaluation of the German currency, somewhere 100% higher than where its implied value is now, and in the process destroy the German economy, which one may say employs quite a bit of the same mercantilist policies as used by that other exporter, China.
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Bad news predicted for second half '11.
http://www.cnbc.com/id/43534613
Jan is the most polite guy employed at the Squid. He's essentially saying "More QE, please" At its arrival he'll publish a paper entitled "Growth on the Horizon" which will be a nice wink to the Bernank. Also potentially, an HJ scandal may be involved. Nil admirari- proper wisdom for life.
A self-fellating ouroboros squid...how lovely.
The franco-german banking cartel is about to strike again. With the NYSE now under control of Deutsche Borse and the algo testing phase over, we are in for a real SHTF scenario, courtesy of the idiots at Clearstream:
http://en.wikipedia.org/wiki/Clearstream
Isn't that what happens when you don't get enough vitamins?
Sure more QE which will flow to the ECB......
the ECB are parched and need someones liquidity!
...brilliant job by Trichet though and sorry to see him leave office at the peak of the ECB's and EU's bankrupt shell game for senile Eurocrat ideologists
Surprised that they haven't proposed their great-great granddaughters hymens? These goofs are getting VERY dangerous in their implicit acknowledgement of desperation that goes so deep as to open the door to ANYTHING.
Think crack whore.
Or perhaps better yet think Pimp/dealer.
These fucks know the game is over.
The pivot point is public reaction to the naked emperor.
?????????
Their great grandaughter's hymens are the collateral.
The public has already accepted default. The public's reaction is probably the same as it was to taxing the american public for the losses incurred in the 'sub-prime crisis': another non-event because there is nothing anyone will DO about it. The default is already priced into the markets because it is the default of the public at large for not having any capacity to affect a different outcome. WE have defaulted.
Maybe this is wrong-thinking on my part----we will find out some day.
The public has already accepted default. The public's reaction is probably the same as it was to taxing the american public for the losses incurred in the 'sub-prime crisis': another non-event because there is nothing anyone will DO about it. The default is already priced into the markets because it is the default of the public at large for not having any capacity to affect a different outcome. WE have defaulted.
Maybe this is wrong-thinking on my part----we will find out some day.
Who is the Mother#&ing junker? I seriously want to know. If I have learned anything from ZH it would be that you MUST have the courage to reveal yourself. DO NOT just 'pussy' junk!
Show up and fight bitch.
(and as an asside, if it is you P.K, I wouldn't trade my life in 'poverty' for your elitist hell EVER. I know about delayed gratification. Mine will not be smuggness.) Love it while you got Ponzi bitch.
Hang 'em high.
Surprised they didn't consider a Century Bond. LOL
http://www.zerohedge.com/article/treasury-expects-hit-debt-ceiling-end-may-discloses-plans-century-bonds
The fact that these type of proposals are being floated says that the Greek Bond question is far from settled. Individual Euro countries are becoming less Euro centric and more nationalistic. This pendulum has just begun to swing away from the Euro. There is also a continuing recalculation about what the haircut consequences will be. In the mean time, all the banks in question are continuing to improve their balance sheets in preparation for the worst case scenario. Nothing is clear about how this will resolve over the next 12 months regardless of the reassurances the ECB, the IMF and the various Euro finance minsters give.
the faux precision of these financial proposals as the underlying securities continue to slide toward the abyss reminds me of the inch by inch revelation of the catastrophe at fukushima (what a name) with the obfuscating elaborate plans for amelioration now come to naught.
Hmm.. To haircut or to haircut. Such tough choices they face.
Seems coordinated from last weeks meeting(s).
The UK banks will be urged by the Treasury to take multimillion pound losses as part of Europe-wide plans to prevent a catastrophic meltdown of the Greek financial system
http://www.guardian.co.uk/world/2011/jun/25/greece-debt-british-banks
Another worry is that Britain's banks and hedge funds have written multibillion-pound insurance contracts – credit default swaps – that would be triggered if Greece defaults.
Osbourne may be able to tell the banks to take it in the pooper, maybe. But that won't stop the liquidation the hedge funds will be forced into.
I'll ask here, since I didn't get an answer anywhere else; what are the chances of Paulson (and other like BH, RenTech etc etc) being synthetically long periphery?
Excellent thought CB! That might be one big piece of the puzzle?
Not much else makes any sense in this mess. I think only an insider
would know before any action?
I mean were the likes of Paulson and Brevan Howard (just to name the two most likely candidates) underwriting GRE/periphery CDS into the weakness this whole time? Paulson said in a statement he has being playing GRE since Q1 of '10. My question is; what was the trade; synthetic long with swaption hedges on SOVX/bespoke basket, or just covering on the dips? It would explain some of that -20% ytd performance. The collateral calls alone he would've received would account for 25% of that negative performance.
As ZH has pointed out repeatedly in the past when debunking popular idiocy on the CDS boogeyman, a short CDS position, courtesy of the CTD basis, would be net cash positive upon settlement.
That said, the last thing on John "damage control" Paulson's mind is to get involved in more PR campaigns involving sovereign CDS.
the time for PR Campaigns (sugar coating turds) is near end. I think we can put June 2011 down as the month everyone wised up and faced the turd (toxic debt) full in the face. Probably why Mr Bright Eyes, Trichet, is exiting stage left as his sugary positive spin no longer washes with anyone..
Now on stage, Mr Ugly Reality
Earlier this week, the MSM featured an exclusive story about the trust fund status. All kidding aside.
Statement of Robert D. Reischauer -- June 22, 2011
Statement of Robert D. Reischauer -- June 3, 2011
So where did the money go? The fiduciary responsibilty will be held to the people who signed the document and allowed the trust to be gambled away.
"fiduciary responsibility".. LOL
Responsibility is for the plebs.
Funny as shit until the plebs figure it out. How are you going to cover for the invested government controlled monies that's not there?
**Inserts laugh track**
You fucked up, not I.
In my own observation, the western plebs seem contempt with their TVs, GMO food, and of course Cialis.
The other plebs(don't count) are contempt trying to feed themselves.
This said despite many a megaphone telling the plebs what's really going on. I want to believe they will wake up, but as long as the boil is slow, they won't.
Point taken. We both reside in the same camp of thinking.
We do have one thing working for us: The more shit they pile into this boat, the harder she is to steer. But the longer she takes to sink, the worse the losses will be. I really fear for what my country will become when we see this through. Needless to say, protection of oneself from the eventualities is well in order.
double post removal
Roll Greek debt over for thirty years. Maybe they should put the debt in a time capsule for
some future Europeans to dig up 400 or 500 years from now. Wouldn't that be a surprise:
" This note is due upon discovery with compound interest"
Don't worry, they'll have Juncker's head in a jar to arrange another bailout then too.
That's actually pretty clever. Maybe Christine will propose just such an idea!
My friend mentioned the other day that her family had Greek takeaway for dinner...this has a new meaning to me now!
that's what the banksters also want, a 'Greek take-away' (asset strip a nation)
I do find it funny that mercantilism is looked upon in mainstream economics as mere foolishness by those pre-Smith morans. When, in reality, it's just exporting unemploymet, the right to do which is eagerly and increasingly fought over. We better find some Martians soon so we can dump our products onto them.
just in time
i was getting withdrawal symptoms, from lack of crazy euro news
I don't understand how German exports are holding up now. I haven't shopped for a car for 9 years, but for everything I have shopped for since 2006 I have always found either something just as good for 75% of the money, or something good enough for half the price or less. I still have a Stihl chainsaw and a couple bottles of gewurtztraminer, but I think that's it.
at the moment i will only buy dirt cheap(china) or top quality(German) i don't know but i guess a lot of folks are making the same choices. either a throwaway item or a built to last and nothing in between. but i wonder if the Germans are making the same mistake that Britain made a hundred years ago, are they selling retooling to the Chinese
Richard - You have hit the nail on the head. Theres the crap we buy and its made by machines. These machines are made by bigger machines and its these biggermachines (and the ones that make these machines, that Germany makes and sells to, amongst others, the chinks.
Greece does not have the exporting capacity or ability to make unique things that the world needs. They are a consumer service nation. There GDP is limited along with economic growth. Regardless if they come up with a plan to kick things down the road by raising taxes and cutting services, they are too deep in debt. Interest on the debt alone will consume most if not all tax hikes and cuts in services. Throwing more money at the problem will not fix it. They will default. If this creates contagion in Europe and the U.S., so be it. The madness has to stop sometime. Investing has risk. If investors get wiped out, oh well. If currencies collapse, oh well. Let the cards fall where they may.
Exactly, but logic is not being employed. The game is to figure out which option hurts the Germans the least.
Also, could someone clear up for me this simple math for 30%-50% haircut? The only thing I can think of is for every 100 owed they get a new bond for 50 and 20-worth of stock. But I figured I'm probably misunderstanding it, since this way the banks have to take a large immediate writedown on their books, so why would BNP propose such a scheme?
Thanks in advance!
With this type of restructuring the haircut is not on principle.
If you have a greek two year bond that is now trading at a twenty percent discount to the purchase price, this plan woyld roll it over into a thirty year bond with an interest rate of five percent more or less.
You get to pretend the principle is unimpaired on your bank capital requirements, as long as you " plan" to hold to maturity.
The haircut is in the future returns of a thirty year, not the principle.
Good explanation, but this is just part 1 of the "solution" (=extend and pretend for another 6-12 months). Part 2: Rating agencies have to say whether this is a credit event... From an investors point of view, changing a 2y bond to a 30y bond = a taking a haircut.
Indeed
Indeed
Indeed
No credit event. Greece issue "solved". No need for more QE here (and probably not anywhere else in Europe either with the China backstop). And the ratings agencies will continue to make themselves look like clowns.
All eyes will now turn to the odd man out. You do know who the odd man out is, right? The patsy?
I see. Thanks!
Financial engineering designed by the fucked for the benefit of the fucked.
There is no free lunch! These clowns are looking for free lunches with Greek debt and it will never come to pass.
PS: Have you seen that Gold and Silver are declining with the equities? Safe haven my ass! They should be reaching newer highs if these were safe havens, while equities are falling. However, the USD is turning up and short term treasury bills are at high demand. Investors are willing to pay Geithner to own short term T bills!
Better prices are coming for Gold and Silver. Keep your powder dry!
Gold at $490 by 2016 and then >$5,000 after we cross this valley of deflation. That's when you trade all your USD for gold and silver.
The safety of USD and short term treasury bills will not disappear during this deflationary spiral. Hoard the USD phsyical dollar bills now, as much as possible. Hoard cash equivalents (Short term t-bills) now before the herd rushes for these. Get out of CDs, get out of Gold and precious metals, don't buy a house as prices will fall another 90%, sell all collectibles and convert to cash...sounds crazy? Not in a deflationary depression. Those with cash will be kings in a few years with available funds to purchase assets at 90% or more discounts. Bankers will give you 3 choices of foreclosed mansions going at 10 cents on the dollar.
Short term: For equities, I expect some level of panic selling before an ABC retrace is made. During this panic selling, the S&P 1249 would be taken out.
Disclosure: Long VXX, FAZ, UUP
Gold is collateral for the oil traders, and they are getting margin called. Gold will de couple agin in a few weeks, once that subsides.
From past experience with the inverse levered products, please don't hold FAZ for more than a day of three. It's a wealth destroyer of the highest degree. It's better than even The Bernak at destroying wealth.
ZSL is another fantastic example of a wealth vacuum.
Even the German Banks want Tax Payers Gurantees on any proposed "roll over".
Instead of extend and pretend just call all this crap what it is:CLUSTERFUCK.
German banks, which say they have some 10-20 billion euros in exposure to Greece, have called for the state to guarantee their risk with taxpayer money should they participate in some form of a debt rollover. .
ROLLOVER INTENTIONS
The industry association head of Germany's private lenders, Michael Kemmer of the BdB, told national daily Der Tagesspiegel that banks were pushing for better conditions since they had a fiduciary responsibility to their depositors.
"Were it to come to a lengthening of the bond maturities, it must be certain that the debt would have a higher standard of quality," Kemmer said in comments to be published on Monday.
On Friday, a senior German banking source said domestic lenders were still examining a variety of proposals and that they would not agree to commit to any rollover deal without a signal from ratings agencies that there would be no default.
German private creditors have been asked by the Finance Ministry to submit spreadsheets with data on their Greek exposure and their intentions to roll over the debt by Sunday evening, two sources familiar with the meetings said.
http://www.reuters.com/article/2011/06/26/eurozone-greece-germany-idUSLDE75P08A20110626
Like a 3-legged cat trying to cover a turd on a frozen pond.
Quote of the day. Genius.
Argentine economics expert Fernando “FerFAL” Aguirre wrote on his Modern Survivalist website June 9: The rumor of one of the largest banks in France cutting the amount of cash people can withdraw to 50% has been around for a few days, but it’s now confirmed by the bank itself:
http://i.imgur.com/1ndnQ.png
(Zero Hedge also reported the story in “Is France's Banque Postale Cutting Its ATM Withdrawal Limit By Up To 50%?”)
Says FerFAL, author of Surviving the Economic Collapse:” Restrictions to the amount of money you can withdraw from ATMs is a clear sign of problem, one we’ve mentioned here before and something that happened in Argentina prior to the economic collapse. Basically it’s the first step to a “corralito”. A corralito is created to prevent bank runs by limiting the amount of money you can withdraw from your own account.”
Regarding the French bank confirmation of withdrawal limits, FerFAL said: My French is poor but this I understand. What it says is people with Visa Premier can now withdraw a maximum of 1500 Euros per week. Those with Visas and Mastercards can withdraw 1000 Euros a week and those with Carte Realys can withdraw 800 Euros per week. In comparison, as of today, in Argentina you can withdraw the equivalent in pesos of 3500 to 7000 USD per week in most ATMs."
Warned FerFAL: “Guys, those of you in France, I suggest carefully considering getting a fair amount of your money out of the bank NOW."
FerFAL related his observations of life during and after Argentina's currency collapse in 2001 with Chris Martenson in the interview – Argentina: A Case Study in How an Economy Collapses.
Said Martenson: "FerFAL experienced the hyperinflationary destruction of Argentina’s economy in 2001 and has since dedicated his professional career, like I have, to educating the public about his experiences and observations of its lingering aftermath.”
http://www.chrismartenson.com/blog/argentina-case-study-how-economy-collapses/59179
French “corralito” around the corner?: New Withdraw Limits Confirmed
Chinese PM was making some flirty noises today about helping with the Euro bailout...
Chinese are the new jooz.
They are tight with their money. I dont see them throwing real money into a rat hole. Anything less than 50 billion probably wont silve it, and the chinese arent likely to throw away that kind of money.
They may make the IMF look generous in comparison if we get to see the details of their secret super senior heavily discounted and cillateralized offer.
The Chinese have made unheard of, obscene profits on their U.S. Treasury holdings. Virtually 99% of their purchases the last 30 years are still in a winning position. Makes sense for them to diversify their holdings into Euro debt, which pays way, way higher than the 1.37% now earned on the 5-year US Treasury bond.
And Greek bonds paying 28% with equity stubs in place of the haircut portion are also good investments for the Chinese, all they have to do is invest .02% of their dollar reserves into Greek bonds and that is probably enough buying power to stick save the entire country.
Those 28 percent bonds are expected to be rolled over into a low yield thirty year bond in a " voluntary restructuring"
The chinese are very risk averse. You are right about them wanting to diversify. I would be surprised if they took the riskiest european debt without the same guarantees that german banks are asking for.
And lets be clear here.
China is NOT interested in saving Greece or any other European country. China is interested in avoiding a revolution in its own country.
The need stable markets. The inflation threat is already taking it toll within China. They cannot afford another destabilization of world markets.
Yup, they pushed all-in with the initial "make it rain" stimulus while republicons quibbled and negotiated more tax cuts in the US stim-u-less.
They can't chase these currencies to maintain the peg without sparking unrest.
Tough cookie.
Mo junk bonds than Boesky.
.
I always considered it a complement to be called jewish with your money. They are smart people, our overlords. We should all strive to have the average income and wealth of an american joo.
this deal might fly, but prob not.
first, the default. who cares? if they get thru this, w/ china providing the Great Firewall, let the default swaps fall where they may. shit happens. this, in itself is an interesting marketplace, since the "default" will only be technical, and the exact opposite of a collapse (at least for now, one must always add, with these crooks). so either the insurance will not be exercised, even tho the buyers paid bigbux for it, or the sellers will get a pretty good pkg of greek debt and an equity fund, plus their premium for the insurance, for their troubles. in the real world, people may chat among themselves, trade FRNs or ?, and tear up a buncha shit.
so, if default isn't an issue (b/c it isn't default, only a 'TKO' default), this bullshit has a coupla other sweet li'l plums.
the new debt (Paste): Also according to Le Figaro, borrowings under the proposed scheme would pay an interest equivalent to what Greek "public" interest is plus a variable interest rate. (End P)
the new debt will be @ par, BiCheZ, and paying just fine, t.y.v.m. this plantation can still function! yes, it is a haircut, but now is marked to market; i think. is that close? if greece doesn't get its shit together, and we rinse, repeat, then: very likely, the % on the bonds will go up somewhat, depending on the linkage, which will cushion the (market value) price decrease of the fuking nefarious paper.
the stock thingy is baffling to slewie. old school sez you gonna buy stocks, you hafta pay. where does the money come from? how can you invest money you don't have? simple! set up Ye Olde Bucket Shoppe, and pretend! just like real life! use an index which can be easily bankster-manipulated to never pay a damned farthing, er, euro to any of the "owners".
now, that the NWO has provided the vaseline,...
...back to the EU, the fifiminis, and the IMF..., greece, and...
...china.
Effectively this is a soft default and restructuring with enough room for banksters to game on looting Greece. The devil is in the details on schemes like this, but Greece needs to read the fine print. Personally I think the Greek population is charged up and aware enough that this will be difficult to execute. Greece's strike starts Tuesday. The banksters will need to turn their debt for equity swap scams to the US, a much larger plum where people are too dumbed down to know what is happening.
>>> ...and in the process destroy the German economy, <<< Bit extreme? German products are not really sold on price, more on genuine quality, like US was (and even UK far enough back). So sale price rises cool their productive businesses a bit (which might help their inflation, by their standards very high), but hardly a disaster. And a return of the DEM would delight German voters (what do they think of an Italian running the ECB). Their banks are cr*p, of course, but they always have been, so no change there (and to be fair, some of that is due to political interference - see Landesbanks)
The article has not been translated correcty. The suggested plan is a partial roll-over with only 70% of the proceeds of full (i.e no haircut) redemptions being voluntarily re-invested. Furthermore, the 20% are not invested in equity but in "high quality" fixed income securities - with most greek financial and corporate bonds trading in the 50/60s of par, a full or even partial redemption pay-off is looking sweet.
we need to hold tyler responsible. less greek, more french, dammit!
Quote of the day. Genius
Wrong place to comment, bollocks
Only the French could make something so confusing and convoluted and claim victory! Without massive debt forgiveness at a government level, this is it for bailouts and contagion will begin!
I missed the part where having a strong currency destroys your economy. So people wanting to own the currency you exchange in is a bad thing? That means that Germans' purchasing power in other currencies would rise. They could either use that to consume more or purchase raw materials at lower prices and become more profitable and set the stage for greater capital development.
It doesn't take a genius to realize Germans are subsidizing the periphery europeans countries. Cutting off the leach is not going to destroy their economy.