Bloomberg Reports That Greek Private Creditor Deal Near, At 32 Cent Recovery, According To Hedge Fund Involved

Tyler Durden's picture

Last year it was bank posturing, coupled with Germany and the rest of the Eurocore countries, when it comes to Greece. Now it is the hedge funds. Bloomberg has reported that the Greek private creditors have "reached a deal" with Greece on existing debt which "would give creditors 32 cents per euro", or a 32% recovery according to Marathon Asset Mgmt CEO Bruce Richards, who until recently was a bondholder, but recently has been rumored to have dumped his holdings, which makes one wonder why or how he is talking for the creditor committee. Of course, with Greece now a purely bankruptcy play, we expect various ad hoc splinter "committees" to emerge, coupled with an equity committee as well (yes yes, we jest). Bloomberg reports also that Richards is "highly confident" a deal will get done. Nonetheless, the Marathon CEO expects Greece won’t make the €14.5 billion ($18.5billion) bond repayment scheduled for March 20. However, he does see a deal with creditors to be in place before then. For now the Greek government has declined to comment. We fully expect the IIF's Dalara to hit the airwaves shortly and to make it all too clear that the implied 68% haircut is sheer lunacy. Naturally, should this deal come to happen, we can't possibly see how Portugal, Spain or Italy would then sabotage their economies just so they too can enjoy 68% NPV haircuts on their bonds. Finally, even if Marathon likes the deal, all it takes is for one hedge fund hold out to necessitate the application of Collective Action Clauses which would blow the deal apart, create a two-tiered market, and effectively create the perception that the deal was coercive.

More from Bloomberg:

There are still obstacles to concluding what negotiators term a “consensual restructuring.” Official lenders may object if they conclude that the deal would be too expensive for Greece, which would force the country to go back for more official support in the future.


“I can only tell you the negotiations are continuing,” said Frank Vogl, an IIF spokesman. “I can’t tell you whether they’ll be successful.” The IIF, a global association of financial institutions, is led by Deutsche Bank AG (DBK) CEO Josef Ackermann.


An agreement reached Oct. 26 called for private holders of just more than 200 billion euros worth of Greek government bonds to accept new bonds with a face value of half that amount, or about 100 billion euros. As part of the deal, euro-zone members agreed to kick in 30 billion euros in unspecified support. That could take the form of buying bonds from the private holders at 100 cents on the euro in cash, leaving them with new bonds with a face value of 70 billion euros.


Negotiations since then have centered on the interest rate new bonds will pay, with Germany among those insisting on a low rate and the private creditors demanding a higher one.


The new bonds will probably pay annual interest of 4 percent to 5 percent and have a maturity of 20 years to 30 years, Richards said. They may trade for about half of their face value, he predicted. Altogether, the net present value of the deal for the bondholders will be about 32 cents on the euro, he estimated.


It’s not yet clear whether the deal will cover all outstanding Greek bonds or just those maturing by the end of 2020, Richards said. He also said that the deal probably won’t contain a sweetener to reward creditors in case of a strong improvement in the health of the Greek economy in coming years.


The tentative deal may win support from investors holding 70 percent to 80 percent of the privately held Greek bonds, he estimated. He favors the deal, suggesting investors who refuse may get back less.


“There’s a very, very high probability that this goes through,” he said. “It’s the best deal creditors can get.”

Well as long as Marathon is talking for all the possible hold outs...

Finally, assuming this deal does go through, we can't wait for Greek people (and thus US taxpayers who are ultimately funding all of this) to understand they are giving hedge funds an immediate 28% return (bonds trading at 25 cents, recovery is 32) which they themselves are funding. On the other hand 7 cents nuisance value on $200 billion is $14 billion. As a reminder, on January 10th we said "We estimate the final tally, to US taxpayer mind you, will be about $20 billion, to remove the "nuisance factor" of hold out hedge funds." In other words, we were almost spot on where we said Europe (and thus America) would "tip" hedge funds to just go away.

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Fips_OnTheSpot's picture

Call in ISDA (just for fun...)

theMAXILOPEZpsycho's picture

How long is it going to take these european leaders to get round the table and address the situation?! It infuriates me, their impotence, lack of coordination! Do they realise the gravity of the situation? All parliaments should be suspended, central banks should send representatives and a supercommitee must be formed. Greece must function, be seen to be functioning; they must be given the opportunity to do so by the germans, dutch, and austrians. For the love of God! Imagine the US, if one state is in trouble the others help! Thats what europe needs right now - not this dilly dallying! Get together and sort out a package! Otherwise standards of living will plummet in southern countries and the north will be left too strong. We knw what that lead to last time; I say unless you want to see another Hitler you support greater centralisation of power and coordination between politicians chosen by the finanical sector.

VanillAnalyst's picture

Just reviewed my GGB CDS contract wording...... apparently 'Credit Event,' means the day Greece starts running those "For just a dollar a day you can feed a hungry Greek," commercials at 3 a.m.

......humph....... guess I should have read the dam thing before I signed it. Oh wellz.


-J Corzine

nope-1004's picture

Three years of endless different monthly iterations of how to spell:

B - R - O - K - E

Getting tiresome, but I find Greek humor still amusing, nonetheless.


FMR Bankster's picture

It is some funny stuff. All these people are wasting time negotiating. Greece will never pay ANYONE ANYTHING they don't get from a third party. All they want is some sort of agreement that will lead to the advance of EVEN MORE OF SOMEONE ELSES MONEY so they can spend it. That way the citizens of Greece won't string the politicians up from lamp posts. (yet)

The Big Ching-aso's picture



Sooner or later this scrumptious Greek salad of Bullshit, Kakamatas, Fetid cheeze,  and sprinkled ChinNuts with Piss Vinagarette, is gonna be served whether they like it or not.

Hippocratic Oaf's picture

I was expecting around 25 cents. But it aint done 'til it's done.

traderjoe's picture

Remember when that Fucktard Leo said Greek bonds were a screaming buy at 8% yields?! Bwhahahahaha...

Not A Monetarist's picture

You are a psycho.  Let's get rid of any form of democracy so we can have the financial sector, who got us into this mess, have total political and economic control of the world with no checks at all! Now that's just crazy.

LetThemEatRand's picture

Nah, a 2/3 haircut is not a technical default in the land of make believe.

redpill's picture

It's not default, it's voluntary, remember? (as if there is a choice)  It's a late Christmas present to the Greek people from all the kind bondholders.  But a credit event?  No no no, how can anyone be so crude as to suggest such a thing.

HoofHearted's picture

The Bloomberg piece used the term consensual. Consensual usually gets used when something else is taking place. Oh I see the link. Trust me ISDA officer, that privaty equity outfit was asking for it. It was consensual...

catacl1sm's picture

If it didn't want it, then it wouldn't have dressed all sexy.

Doña K's picture

Dear Greeks:

Let some heads roll and then do yourselves a favor and default or better yet add insult to injury and offer 2 pennies to the euro, as this is the only way to salvation. Monitor future government spending not to exceed receipts.

Do away with all politicians selling you down the river.

AlaricBalth's picture

FROM THE ISDA: January 16, 2012

Greek Sovereign Debt Q&A
The following are responses to the most frequently-asked questions that ISDA has received in
connection with the application of credit derivatives to a potential restructuring or reprofiling
of Greek sovereign debt. The following does not constitute legal advice, and is
subject in all respects to any determination that the ISDA EMEA Credit Derivatives
Determinations Committee may make in relation to CDS referencing the Hellenic Republic


The possibility of retrospectively applying Collective Action Clauses (CACs) to existing
Greek debt has been discussed of late. Would the inclusion or activation of a CAC
trigger a Credit Event?

The determination of whether any action constitutes a credit event under CDS documentation
will be made by ISDA’s EMEA Determinations Committee on the basis of the specific facts
and if a market participant requests a decision from the DC. Generally, however, the
inclusion of a CAC would not, in and of itself, be expected to trigger a Credit Event. On the
other hand, the use of such a clause to effect a reduction in coupon or principal or one of the
other events set out in the definition of the Restructuring Credit Event could trigger if the
other requirements of the Restructuring Credit Event were met (for example decline in
creditworthiness), as its effect would be to bind all holders of the relevant debt.

bnbdnb's picture

Well, if it doesn't trigger a CDS, does that mean the purchaser gets their CDS insurance money refunded?

Joebloinvestor's picture


How long before this RUMOR blows up?


JamesBond's picture

rumormill bitchez

find a blade and sit on it.


SheepDog-One's picture

Im waiting for the next rumor within hours that Europe is about to do a $20 Trillion bailout for the banks, got to up todays $10 Trillion rumor, and yesterdays measely $2 Trillion rumor.

The Swedish Chef's picture

BULLISH!!! Unless, of course, you lent the failed Greek government some money...

Black Forest's picture

would give creditors 32 cents per euro

Excellent deal. My deepest respect.

howswave5workingforyou's picture

wow. what debt/gdp does that leave Greece at? better off cutting deep to try and get closer to debt sustainability. 

Cdad's picture

all it takes is for one hedge fund hold out to necessitate the application of Collective Action Clauses which would blow the deal apart, create a two-tiered market, and effective create the perception that the deal was coercive.

Is there anyone out there that does not already KNOW that this will happen?  This is purely the case of spinning something disasterous as good.

Just a joke.  Let the CDS wars begin already.

Boilermaker's picture

You know that SOMEHOW, 31.5 cents would have constituted a 'CREDIT EVENT'.

How is this bullshit going to be spun?

Cdad's picture

So far, the criminal syndicate known as Wall Street is simply going with the spin strategy of "Priced in."

There.  Apocalypse averted.  See how easy it is in central planning land?

SheepDog-One's picture

Besides that, hell we got $20 Trillion free Euros comin! 

Party time!

yogibear's picture

Where's a good Warren Buffet rumor when you need it? 


How about sightings of PLOUTOS (or Plutus), the Greek god of wealth from within Greece?

Zoltan's picture

Marathon Asset Management cited on BNN supporting this story.


falak pema's picture

ha, ha ha, 32% recovery is 68% write down; so much for the HFs saying they had Greece and Euro by the short hairs; correct me if I'm wrong!

Tyler Durden's picture

Greek bonds cost 25 cents. They get 32 cents. 28% recovery, although assuming one holds the post-reorg paper thru maturity, which for a Greece that will have almost no debt should be feasible.

Yup. They did.

SheepDog-One's picture

OH I get it now and it makes more sense, everyone gets a 130% recovery on their failed Greek bonds....spectacular!

LawsofPhysics's picture

So essentially, Greece already defaulted, no CDS triggered and this is the "New Deal" for Greece.

Do I have this right Tyler?

redpill's picture

Makes one wonder just what a sovereign has to do to trigger a CDS if this doesn't qualify.  What is even the point of sovereign CDS is they can just pretend defaults don't exist?

LawsofPhysics's picture

This is extremely bullish.  Although I certainly would not want to be an attorney for one of the banks that sold that debt to the HF boys.

Calmyourself's picture

Hmm, I think I may have posted somrthing about no rules, no regulators, no triggers to calamity with the exception of hunger..  Contracts mean nothing in this brave new world didn't MF Global teach you all anything?

DosZap's picture


Well if it hasn't, it should.

I forsee (at least here), a ZH mini bank run,all paper contracts avoided unless Lawyered UP.And removal of oneself from ANY legal docs,contracts,investments,deposits not prepared by yourself.

It's become patently obvious paper agreements will most likely get you GREASED

Cash,PM's,and barter goods, and a good man cave.(Well hidden)

Calmyourself's picture

My middle name; Prepare youself, last name; Defend yourself, physically, financially, spiritually.. Mom was a bit of a hippie..

falak pema's picture

wow, and that is on what value of portfolio??? The recalcitrant HFs hold how much? Or is this accross the board for ALL bond holders, not just the HFs?

The least these HF managers can do is spend the rest of their lives spending vacations in greece to say thank you to the country who paid them so handsomely!!

Saba, Aba and baba; went to Greece in a bonded boat, Aba drowned but Saba made out good!

SheepDog-One's picture

Shouldnt Greek debt holders be like GS and recover 105%??

Pancho Villa's picture

Excellent! I exchange my Greek bonds for new ones at 32% of their initial value. And then I wait for Greece to default on those new bonds.

howswave5workingforyou's picture

most banks have marked these down considerably. the outstanding nominal value is 8bn euro. this is very bullish for the Greek economy. bring on the euro weakness. will help the exporters. 

PaperBear's picture

To use Jim Willie's analogy, your building has only had 2/3 of it destroyd by fire but it's still not a fire for the purposes of your insurance policy. These Credit Default Swaps are contracts that are not really a contracts - f**king, f**king, f**king, f**king really dumb.

AlaricBalth's picture

Legal Aspects of the Greek Debt Stock

Governing law. From the legal standpoint, the salient feature of
Greece’s bond debt is that approximately 90% of the total is governed by
Greek law. Only about 25 billion of the bond debt was issued under the law
of another jurisdiction, and most of that under English law.

Collective action clauses.

It does not appear from a survey of Greek bond documentation that the instruments issued under local law  contain provisions permitting the holders to amend the terms of the bondsafter issuance (other than to correct obvious errors or technical matters).Prior to 2004, Greek bonds issued under English law contained collective action clauses (“CACs”) that appear to permit holders of 66 percent of an issue to modify payment terms in a manner that would bind all other holders.After 2004, Greece altered this clause in its English law bonds. This new version of the CAC permits amendments to payment terms of a bond, as well as certain other key features of the instrument, with the consent of holders of 75% or more of an issue. Some version of a collective action clause appears in most of Greece’s foreign law-governed bonds. There is no reason not to use these clauses to minimize the number of non-participating creditors. It would work as follows: each tender of an existing bond containing a CAC would contain a power of attorney from the owner of that bond in favor of the government (or its exchange agent) to vote that bond at a bondholders’ meeting (or in a written action by bondholders) in favor of a resolution that, if approved by the requisite supermajority of holders of that instrument, would either cause the totality of that bond to be tendered in the exchange or cause the payment terms of the bond to be amended so as to match the terms of one of the new instruments being offered in the exchange. Such a resolution, if approved by the requisite supermajority of holders (66% or 75% in Greek bonds governed by English law) would automatically bind all holders.

Captain Kink's picture

You answered an important question that was bugging me.  Thank you.

Mercury's picture default here?

Privately held Greek debt hedged with CDS must be a rare thing by now.

Why would you agree to collect 32c per Euro when your CDS would pay 100 ?

SilverIsKing's picture

Why agree?

Because it's a deal they can't refuse. Youz know what I mean?