Greece Kills Bond Buyback Proposal

Tyler Durden's picture

One of the zanier proposals floated in the past few weeks, yet sufficient to send Greek bonds soaring to post-restructuring highs on hopes of a take out, was the suggestion that Greece would repurchase its fresh-start bonds in the open market, which recently traded in the teens, and have since virtually doubled, at a price ~25 cents of par. Obviously since the price of the bonds had been much lower, even the mere possibility of what is termed in the industry as a distressed buyback, sent everyone scurrying to purchase the paper, as if it had any intrinsic economic value (it did not), instead of mere hopes that Greece would throw even more good money after bad (especially since the fresh start bonds have a meaningless cash coupon and nobody expects them to be repaid at maturity). There is also the detail that a distressed buyback is, for the rating agencies, equivalent to an Event of Default, but knowledge of that small fact would be demanding too much out of those who scrambled in the latest chase for yield. Anyway, with all that said, it now appears that the whole idea is over, with Greek Kathimerini reporting moments ago that Greece has scuttled the proposal for a bond buyback.

From Kathimerini:

The Finance Ministry is ditching banks’ plan for a bond swap that would have eased their recapitalization requirements.


According to sources, Minister Yannis Stournaras has rejected the proposal that local banks presented to him, suggesting that this would be a move that would benefit bank shareholders disproportionately. Ministry sources added that such a move would generate accusations about favorable treatment of banks in comparison with other holders of Greek bonds.


That is also the view by the troika – i.e. the representatives of Greece’s creditors – who had earlier rejected a similar plan.


Nowadays domestic lenders have in their portfolios bonds issued after the March 2012 bond exchange, known through the acronym PSI (Private Sector Involvement), which have a nominal value of 14 billion euros but are traded at 35 basis points, which means their current value stands at 4.5 billion euros. Due to this difference, banks are burdened by accounting losses of 9 billion euros, which a bond swap would practically erase as the new bonds would have been closer to the nominal value of the existing ones.

So much for Greylock and their deja vu as of last week comment of the "slam dunk" trade of the year.

At least there is some hope left: those who followed this development closely and were as amused as us by the inherent stupidity involved, and traded accordingly, are about to make money on an otherwise very insolvent country one more time.

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redpill's picture



-- Mr. Panos

nope-1004's picture

Just do a FASB greek bond style, prollem solved.!!!!!

Revalue the junk to non-junk, recapitalization takes place through balance sheet fudgery, and life goes on - no one knows nothin', where the money went, who got what, nothin!!!!

Stupid Greeks.  Should listen to Geithner more often on how to run a ponzi scheme and steal from the poor to give to the rich.



Larry Dallas's picture

This country is being sold long past its due date.

The corrupted government got what they bargained for and let the civil unrest reset the clock. I can't see any other way of this straightening out.

redpill's picture

1) Old News

2) No one here is surprised, not even a little bit

NotApplicable's picture

3) She's running against Akin, so she's got nothing to worry about. (she even ran commercials to help him win the primary)

Yen Cross's picture

 Earth calling Rajoy... (CLICK)  Would Mr. Rajoy please get to the front of the (OMT) line...

  Spanish yields are going to go ballistic! The Greek card has been played.

NotApplicable's picture

As measured in what? Certainly not Pieces of Eight.

Yen Cross's picture

 Those Spanish Dollars, are spoken for.  well done  N/A

goldencrumbs's picture

Geniuss, Geniusss, Geniusss, Geniussss!!

Mactheknife's picture

Got to hand it to those Greeks...they may be a lot of things (insert derogotory name here) but stupid isn't one of them.

Nussi34's picture

Bomb the Greek sheepf*ckers!

They need ze austeriteee!

Urban Redneck's picture

if you do zany, it has to be unofficial, preferably with front-man who has a large under-performing fund and plausible deniability, and after the price has reverted

Zero Govt's picture

I presume the photo of the Greek Finance Minister under trees and blue skies is in a walled high security garden free of the public he 'serves' ...cough

...who'd probably rip his face off if he stepped into a public area

Politicians (bwankers puppets) and their magic touch in society, blessed.

Love to see Christine Lagarde 'Meet the People' in Greece, explain her tax-less existence to those she proposes pay more tax... recommend her PR agent get her to drop the Louis Vitton handbag for the debate, looks a bit 'rich' and we wouldn't want it wrapped around her throat 

incidentally Christine, most luxury car makers have tax free/avoidence pages on their websites for Diplomatic car sales ...before the batty bitch gets on her high horse (again) suggest she address the luxury car purchasing, tax-avoiding Diplomatic core (chairty begins at home afterall, wave your handbag in the IMF and UN babe)

what with luxury handbags, luxury cars and tax dodging Diplomats you might want to work on the public image you lot of tax-shirking, over-payed, luxury living, pampered public pussies are projecting before suggesting both more austerity and higher taxes for Joe Public

Times are changing rapidly, a tad faster than the hypocritical human scum of Govt can bullshit their way out of

yogibear's picture

Draghi, you and your banksters can suck on the losses!

chump666's picture

Greece is the epitome of a mass is it's bond markets. Hence the hedge funds making cash off the insane.

All the power to them.