Greek Debt Buyback Participation Still Short Of Target After Deadline

Tyler Durden's picture

The tension over the Greek buyback, which was supposed to be completed on Friday with satisfactory terms, i.e., holders of more than EUR30 billion of new bonds tendering (at prices between 30 and 40 cents on the euro), is rising following a report from Kathimerini that roughly EUR25-26 billion has been accounted for, short of the formal target needed to hit the deleveraging goal. Confirming that the biggest beneficiary from the buyback are foreign (mostly US-based) hedge funds, while the biggest loser are Greek banks, is the participation rate which has seen a majority of the tenders, EUR16 billion, come from hedge funds happy with a 100-200% return in a few months as explained previously. For the banks the pain of writing down debt by two thirds once more after doing the same in March is far greater and explains why only EUR10 billion (of a total of EUR15 billion held by the sector) have been tendered into the buyback, by official Greek financial institutions who are also fearing retribution from shareholders despite official promises by the Greek FinMin they would be shielded from the fury of the people. That said, insolvent Greek banks have no choice if they wish to receive the billions in Troika funds used to replenish their underwater capital base and like it or not have to agree to the debt deal.

So with the target still shy by EUR4-5 billion, Greece is doing all it can to spin the deal as overwhelmingly successful, even though it knows full well it still doesn't have the numbers, to get even greater participation and avoid the perception that holdouts have any leverage from a Nash equilibrium standpoint, and can demand even better terms by not tendering bonds. As such Kathimerini adds that the offer books will likely be reopened on Monday, contrary to what had been said previously, so that the transaction can be completed by the "drop dead" deadline of December 13 when the much delayed bailout tranche finally has to be wired.

Some more from the WSJ:

Greece was close to achieving its target in a multibillion-euro debt-buyback plan demanded by the country's official creditors as a precondition for unlocking fresh aid to the country, officials familiar with the plan said Saturday.


Greece's debt-management agency—tasked with conducting the buyback—finished Saturday tallying up the results of bids made by investors interested in taking part in the deal. According to the officials, the total bid from both domestic and foreign holders of Greek bonds was close to a targeted €30 billion ($38.78 billion). When a formal announcement would be made was unclear.


"The results are between satisfactory and good," said a senior government official. "We haven't hit [the target] yet, but it will happen."


Greece ended the offer period for its debt-buyback program Friday evening, roughly two weeks after euro-zone finance ministers agreed in Brussels on a complex series of measures to reduce Greece's debt burden further. The most significant of those measures was a plan under which Greece would use as much as €10 billion to buy back outstanding bonds at around a third of their face value, thereby shaving €20 billion off the debt.


Euro-zone ministers and the International Monetary Fund have made that buyback program a precondition for unlocking a next tranche of badly needed aid to Greece. And the buyback must be completed by Wednesday, the day before euro-zone finance ministers are set to decide whether to greenlight the next tranche of aid.


Greece's Public Debt Management Agency gave bondholders until 5 p.m. London time Friday to make offers of how many bonds they would sell and at what price. A final decision on how many bonds the government will actually buy, at what price, and how much the Greek banks will hand over, might not come for several days, according to people familiar with the deal.

Of course, the question of how "voluntary" tenders of EUR26 billion out of a total outstanding GGB2 pari passu bond notional of over EUR60 billion can be claimed to be representative of a full voluntary full class endorsement, remains open. But anything as long as it is "voluntary" for anyone but the hedge funds who bought said debt at realistic prices in the teens.

To summarize, Europe continues to do everything down to the wire, with every decision being a push, usually involving a phone call from very high sources to get holdouts on the side of the needed consensus to keep everything from unwinding. And while the buyback may pass, in the 11th hour and 59th minute, one day a marginal decision-maker in Europe or elsewhere, may get the impression that defecting from the fold just may be the best game theoretical option, and send it all crashing down. Just when and where this event will take place of course remains a mystery.

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GetZeeGold's picture



Did NOT see it coming!!!

lizzy36's picture

The will kick this can until one day it is physically impossible to do it always the only thing to consider is timing.

Blow back from this shit show, has me happy to be a Canadian (even if it is -30 this morning)

Mactheknife's picture

Nope...not a can anymore.  It's a large grenade and the pin is almost out...

Eally Ucked's picture

As of now Canada FEDERAL debt is 601 bln. It's around 17.2k per head now. Provincial debt around 550 bln that means 15.7k per head. Now how consumer looks like in Canada?

Dareconomics's picture

This bond exchange is only window dressing. It makes today's numbers seem better at the expense of tomorrow. The banks, hedge funds and Germans do well under this deal. The Greeks, not so much:

A Man without Qualities's picture

Something about this seems very fishy.  These hedge funds are supposed to be in the money because they bought at the bottom, i.e. in the 15 to 20 cents range, i.e they are not the ones that got the bonds at the initial exchange.  We are supposed to believe that they can build a position equal to 25% of the total issue size, (c. €15 bn) or more like 40% of the size excluding domestic Greek lenders (banks and pension funds), but they can build this sort of position no problem all at the bottom?

Then, we are supposed to believe that these funds (who in reality are uber-aggressive) will volunteer to take a gain that is guaranteed to be less than the value of the bonds once the exchange takes place and the Troika, IMF money comes in?

This is simply not the way these funds work.  The idea that they will take a 60% gain as being a decent offer is just not how they think.

Mactheknife's picture

LMAO...I see a little "bunga, bunga" revenge coming!

Non Passaran's picture

That is great news!
And in Italy Monti will resign and Bunga-Bunga is baaack!
It's time for some serious fun!
My short ETF's will soon be back in green...

FL_Conservative's picture

So while this might be "good" for the Greek government, explain to me how it is "good" for Greek bank capital requirements when they sell GGB's that had been accounted for at par (up until the point of "sale" back to the government) at 33% of par?   I must have missed that part of the "plan".

CrashisOptimistic's picture

Because the jig is up.

If they can't fund their deficit, people die.  Pensions don't get paid, their foodstamps equivalent doesn't get paid, their Medicare doesn't get paid.

No question entitlement spending is too high for most countries, but the correct number is NOT ZERO.  Zero kills people outright.

Their deficit is so high that if they don't get the tranche, people die.  That's why it's good for the Greek gov't.  They have no choice if they want their citizens to eat.

LongSoupLine's picture

In other "shocking" news, the country is run by a crook politician out of chicago.

WallowaMountainMan's picture

so, like can we gets an ongoing list of what hedge funds are buying?

i gots an extra 32 bucks i'd like to run up...

AmeliaV's picture

It seems that things are getting better for Greece, they are on the right track and probably will successfully pay off the debt. The situation in Greece is probably the hardest in Europe because they had a risk of leaving EU, but probably that the worst times have left behind and Greece can successfully fix financial problems. But any case, there’s still a lot of problems, people in Greece still see the consequences of the crisis and use borrowing at PaydayLoans@ to stay afloat. Financial crisis is never easy and it takes time to get back to normal financial life.

Athenian's picture

Borrow money to pay off an interest payment and add to the capital owed. Borrow more to pay off an interest payment and add further to the capital owed. Borrow more again to pay off an interest payment and add even further to the capital owed. Repeat ad nauseum, until infinity. Good solution fellas.