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About Those Foreign-Law Greek Bonds...

Tyler Durden's picture


With Greece seemingly well-and-truly in the mainstream media's rear-view mirror, we thought it useful to go over a few details that are 'evolving' as we approach the CDS auction and foreign-law bondholder participation deadline. In a nutshell, there are now seven (count them seven) classes of debt in the Greece capital structure ranging from Old GGB holdouts to Troika- and EFSF-subordinated 'loans'. Critically though, just as we have written extensively, it is the size of the holdouts that will become a growing headache for the European Greek government. As BNP notes today, there are at a minimum EUR2.5bn but potentially up to EUR11bn of holdouts that leaves the Hellenic Republic with the chance of achieving 100% participation practically impossible and some very difficult choices between a disorderly failure-to-pay default on these holdouts (with all the ugly ramifications of out-of-control bankruptcy and litigation) or 'unfairly' pay this 'small' group of desperadoes out as normal (i.e. pay interest and principal to Par at maturity - no haircuts). This is exactly the 'blocking-stake-Foreign-Law-bond' strategy we suggested that hedge funds would undertake and it appears successful given the record price differential that now exists between Greek- and Foreign-Law bonds.


The spread between Foreign-Law and Greek-Law bonds has risen from EUR18 to EUR27 currently since we posted our original insight Subordination 101.

Of the Greek SOEs, only EUR 0.47bn of the EUR 3bn outstanding tendered for exchange or voted in favor. This means that a minimum of EUR 2.5bn from this category will likely end up being holdouts, unless they change their mind by the extended deadline of 23 March.


Of the EUR18.6bn Foreign-Law Greek bonds, 71.2% of the total outstanding voted either for or against, and of this quorum, a 95.6% majority voted in favor of the proposed amendments . However, these bonds do not have aggregate CACs, and what really matters is the quorum and the votes in favor of each individual bond series. Bonds with large outstanding amounts are less likely to see blocking states. This leaves up to EUR8.5bn (but more likely EUR2-5bn) eventual holdouts.

So the likely total holdout amount will be EUR4.5-7.5bn but could be up to EUR11bn.

But the real decision is just how subordinated you really want to be in this new seven class capital structure (that only looks worse in 2014)...

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Thu, 03/15/2012 - 14:24 | 2258739 evolutionx
evolutionx's picture

After Goldman: JPMorgan whistleblower

Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people.


full Text here


Thu, 03/15/2012 - 14:31 | 2258764 SheepDog-One
SheepDog-One's picture

Yea, well... full text HERE Is JPM Metals "Whistleblower" Letter A Complete Fraud Or Just A Total Mockery? | ZeroHedge where it was an article earlier on this very site.

Thu, 03/15/2012 - 14:24 | 2258740 Ahmeexnal
Ahmeexnal's picture

And yet the sheeple party on....

Thu, 03/15/2012 - 14:37 | 2258787 monopoly
monopoly's picture

Yes they do. Concert soon at the "grave yard."

Thu, 03/15/2012 - 14:27 | 2258749 Tsar Pointless
Tsar Pointless's picture

Greek bonds?

S&P 1400 says "I don't care, bitchez!"

Thu, 03/15/2012 - 14:33 | 2258771 SheepDog-One
SheepDog-One's picture

S&P 1400 sez 'Duhhhh Im a fukin full retard'

Thu, 03/15/2012 - 16:22 | 2259225 resurger
resurger's picture

i was watching CNBC today! one of the Anchors was really pissed because of Smith Greg whistle ... he was so nervous that he wont see S&P above 1,400


Thu, 03/15/2012 - 14:39 | 2258800 battle axe
battle axe's picture

Wait a minute, this didn't get settled a few days ago and instead is all screwed up? How can this be with the EU in charge, since they have been on top of this from day one? /sarc

Thu, 03/15/2012 - 14:39 | 2258803 Piranhanoia
Piranhanoia's picture

This must be some toilet paper.  The size of sponges are shrinking while the price goes up.  Will the mess be smaller this way?  

Thu, 03/15/2012 - 14:42 | 2258813 Dr. Richard Head
Dr. Richard Head's picture

Greece has become a real-life case study in what counterparty risk is all about. 

I am but 33 years-old, but I have only encountered ONE person in my entire life that has been able to reap the retirement harvest of their pension, 401K, or social security for that matter.  The rest of the people that I know at retirement age are skimping by, continue to work through their old age, while looking back at the promises made to them as they "invested". 

A smart man learns from his own mistakes after it is already too late.  A wise man learns from the smart man's mistakes befure they become his own.

Thu, 03/15/2012 - 15:05 | 2258889 Silver Dreamer
Silver Dreamer's picture

This reminds me of something my father told me recently.  He's usually pretty mum about his money, but he has a pension from Caterpillar.  For 31 years of work, he received a pretty sweet deal.  Every year that has past since it was awarded however, it has been changed to be worse and worse.  A good example is how his life insurance used to be 30K, which 30 years ago was a huge sum.  Every year for the last so many years that insurance dropped by half though.  They assured him it would not go below 15K.  har har   Wow, 15K!  Apparently, he's lived much longer than they anticipated he would.  Funny, that exact scenario sounds like some other much larger government plan...

Thu, 03/15/2012 - 14:59 | 2258877 Die Weiße Rose
Die Weiße Rose's picture

Ask the People of Argentina what they think of the IMF !

Most People in Greece already know that there is NO WAY

they will ever be able to pay back this mountain of Debt

piled onto them by their greedy Government,

and by the corrupt IMF and the ECB

a "Central Bank" that is really nothing more than a vulture Hedgefund

dealing in Junk-Bonds and robbing Greece of it's last remaining assets !

Greece will have to default, there is really no other way.

Greece Debt will need to be written off 100% so the country can start anew,

without IMF vultures and ECB leaches !


Thu, 03/15/2012 - 15:05 | 2258892 Capitalist10
Capitalist10's picture

"piled onto them by their greedy Government"

that was elected by who?  that was pandering to who?

The Greeks got the government they deserved.

Thu, 03/15/2012 - 16:40 | 2259282 donsluck
donsluck's picture

At the risk of offending (my appologies) but you sound naive.

Thu, 03/15/2012 - 15:03 | 2258883 Schmuck Raker
Schmuck Raker's picture

OOPS goes Ireland:

News Headline Summary-RanSquawk


(Economic commentary)


Ireland seeks significant reduction on EUR 17bln total interest bill on bank promissory note according to a spokesman
Thu, 03/15/2012 - 15:40 | 2259052 ReallySparky
ReallySparky's picture

Go Irish!  Timing is everything, I like that 17bln, right before Saint Paddy's day.

Thu, 03/15/2012 - 15:13 | 2258930 slewie the pi-rat
slewie the pi-rat's picture

the wonders of compound interest!

so now!  we won't take the $2 and will take the $20,000 instead

thank you!  and, buh-bye!  

Thu, 03/15/2012 - 15:30 | 2259006 bobola
bobola's picture

yield on the 1 year Greek bond seems stuck at 1,143%.

Did it hit a wall on the way up..??

Bond trading halted until further notice..??



Thu, 03/15/2012 - 19:02 | 2259748 Buck Johnson
Buck Johnson's picture

This debt is unpayble and for them thinking about another bailout tells me that we are just throwing good money after bad.

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