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The Final Final Greek PSI Decision Tree
A few days ago, before the definitive Greek PSI term sheet was available, we presented the complete preliminary BNP PariBas decision which despite having some assumptions was almost spot on in its flow chartness of Greek next steps. Today, to avoid any confusion on the matter, here is Bank of America with its take on the finalized Greek PSI Terms and the final final (until changed yet again) Greek decision tree.
From BofA's Sphia Salim (who may have borrowed an idea or two from BNP):
Greek PSI: total notional at €206bn; SMP holdings excluded
On 24 February, Greece released the Invitation that marks the start of the Private Sector Involvement (PSI). The Invitation is a combination of 1) an Exchange offer, and/or 2) a Consent Solicitation, applicable to a total notional amount of €206bn of Greek government bonds and government guaranteed bonds (some holders may receive only one of (1) or (2) due to regulatory requirements). We also note that the bonds that are held by the ECB and the NCB as a result of the SMP purchases do not count in the targeted €206bn notional.
There are still three possible outcomes for the Greek PSI
Depending on the percentage amount of the bonds that will be tendered for exchange and the percentage amount for which amendment consents are given, there are three possible outcomes: i) the PSI will go through voluntarily, ii) the PSI will go through via amendments enforced by the exercise of CACs (Collective Action Clauses), or iii) the PSI will simply be abandoned. We derive the scenarios leading to each potential outcome in a decision tree (Chart 1, page 3).
Tenders for exchange differ from consents for amendments
For the majority of the bonds, Greece will invite private sector holders to proceed voluntarily with two distinct actions: 1) to tender their bonds for the Exchange (details in FX snapshot 21-Feb), and 2) to submit a Participation Instruction to state if they would consent and/or vote in favor of a change in the terms of the bonds, with the amendments providing for the redemption of the affected bonds in exchange for exactly the same package as in (1).
A bondholder who agrees to (1) would automatically be considered as consenting in (2). On the other hand, a bondholder who does not agree to exchange his bonds voluntarily in (1) may still submit his consent for the amendments in (2). This may be what a holder who aims to benefit from a CDS trigger would do, as he may be in favor of the PSI only if it is enforced with the exercise of CACs.
66% is the threshold of Greek Law CACs, not the PSI target
Among the €206bn targeted bonds, a €177bn notional is governed by Greek Law while the remainder is subject to foreign laws. With the recently ratified Greek Bondholder Act, the terms of the aggregated €177bn of Greek law bonds can be amended with the exercise of specific CACs. More specifically, if deemed desirable, Greece would be able to enforce the exchange of these bonds so long as holders of more than 50% of the €177bn have tender their bonds or just submitted their instructions in (2), and more than two-third of these instructions correspond to a positive consent. Such a decision would trigger CDS, as the exchange becomes binding on all holders of Greek law bonds. It would also mean 86% of the targeted €206bn will be exchanged. The two-third threshold discussed here differs therefore from the minimum 75% participation targeted for the PSI.
If ≥ 90% participation can be engineered, it will be
If a) 90% of the €206bn of bonds are voluntarily tendered for exchange, or b) Greece has received sufficient consents and/or votes in (2) to enforce changes in the terms of some bonds through CACs (Greek law bonds in aggregate, and/or individual International law bonds), and guarantee that more than 90% of the €206bn would be either exchanged or amended, then the PSI would likely be completed with more than 90% participation. In the first case, Greece would be required to settle the exchanges and the PSI would be purely voluntary. In the latter, it would come with a CDS trigger and would therefore be subject to a consultation with the official sector creditors (See cases (a) and (b) in Chart 1).
If not possible to engineer ≥ 75%, PSI will be abandoned
On the other hand, we understand that the PSI would be abandoned if less than 75% of the €206bn have been tendered for the exchange, and Greece cannot enforce amendments in enough bonds based on the consents submitted, to guarantee that over 75% of the €206bn notional will either exchanged or amended (case (e) in the decision tree). We believe this should only occur if CACs cannot be enforced in the Greek Law bonds (because these would allow for 86% forced PSI), meaning that either less than 50% of the €177bn holders have tendered their bonds or submitted a Participation Instruction (be it positive or negative), or that those who submitted a negative Participation Instruction represent more than 1/3 of that set (aka blocking stake).
And now the chart you've all been waiting for
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Thank goodness Apple has rolled out an application to manage your entitlement budget. If you have arthritis, frozen fingers, or don’t have ten fingers to compute.. Chisenbop is not for you. Before cable, this TV advertisement was nonstop.
http://itunes.apple.com/us/app/chisenbop/id429339367?mt=8
As a child, I recall watching a Chisenbop spoof of this math. While he was computing advanced math with his fingers on the table, the spoof exposed the individual was using a calculator under the table with his toes. Some childhood memories never leave the mind.
In conclusion, Government math presented under fictitious illusions will be called out as fraud in due time.
What you need to realize is that the arrows go in and through the sheet to the redirection arrows on the back side of the sheet. The side you don't see, all pointing to a or c..
Nothing will change.. It's all BS..
Cute way of stating your observations. What's this? [Below Link] Games are games. In the end, someone will grab the game & throw it into the air.
http://www.glassgiant.com/geek/binaryclock/binary_clock_flash.swf
Here's a good video about the company that handles Bank America's customer service:
TeleTech Exposed:
http://www.youtube.com/watch?v=LkT9EZk63SY
Even Krugman is starting to see the light.
http://www.bloomberg.com/news/2012-02-27/krugman-says-greece-running-out...
Pauly Krug said the same thing here on Zero Hedge Saturday night.
yikes ... history has proven to me that when Krugman and I are on the same page, it might be time to rethink my thesis.
TRIGGER!
Decision tree very pretty, and the flowers are so sweet
But the fruit of the poor decision is impossible to eat...
Can't eat silver either.
The original decision tree-Prepareth the holy hand grenade http://www.youtube.com/watch?v=xOrgLj9lOwk
WOW, I am so glad there is a lot of Monty Python enthusiasts. They were the GREATEST!
They better act quickly, it is a war zone over there and people are starting to get killed:
http://www.youtube.com/watch?v=9KEsJDINxh4
When riots get out of hand, the time for a reasonable solution has passed. There has to be order or else there shall be chaos and anarchy. The government can enforce order by martial laws. Add martial law to austerity where the fruits of labor are abused to make some banker's balance sheet whole. It's a prison.
Looking at that chart above and despite all the research I've been doing, I have a very hard time making sense of it. It literally looks like Jibberish. They are doing this on purpose to bamboozle everyone.
Default is inevitable, tomorrow, next month or next year. The bankers and their political whores are committing the only crime worse than theft and fraud, they're committing necrophilia.
The corpse is dead and yet the bankers and their political whores continue to fuck the corpse.
Disgusting. Abominable.
I would spit in their faces all day long until I'm out of spit. They're behaving like child molesters. The debt oppression is as bad as forcing kids into child pornography.
FUCK THE WHOLE LOT!
I have no doubt your anger is real, but is is misplaced.
The Greeks are not suffering because bondholders are demanding repayment, the Greeks are suffering because nobody will give them more money. Greeks are not repaying anything, they are merely accumulating more IOUs that they also will not repay. The imposed austerity measures are in return for giving Greece more money, or rather paying off the bondholders.
With or without the bailout, Greece is having austerity forced upon it because it has no money to pay for the social system to which it has grown accustomed. If the EU just said "go ahead and default" and walked away, Greece might lose its debts but it would still have no money and would still suffer under the same austere conditions.
The entire bailout merely uses Greece as a backdrop. In reality it is about the EU trying to save its banks. Greece is the convenient line item on the collective EU balance sheet on to whom the obligation is being thrust, but nobody is actually under the illusion that it will ever be repaid. It is window dressing for the still-surviving. Greece is already dead, and nobody really wants to give it any more money.
The citizens of still-illusory-solvent EU nations are the ones getting shafted, not the Greeks, for the bondholder bailout, though they are as silent as US taxpayers who funded, or at least assumed the obligation, for the Wall Street bailouts. The Greeks are now like Somalia; they need the charity of the rest of the world to maintain their lifestyle, because debt or default, they cannot pay for what they want. The public infrastructure---companies and workers---is dead regardless. Greece wasn't paying its obligations and won't start now. The domestic suffering is happening now because nobody will give Greece the money to pay the public sector salaries, pensions, entitlements, etc., and because all of what previously filtered through the private sector from government spending and government worker spending now will cease.
It is undeniably sad, but it is not anyone's fault for not wanting to give Greece new money it won't repay for a lifestyle it cannot afford.
--"giving Greece more money"
You mean LENDING Greece more money. Even here on ZH and everywhere else in any media the terms for the new LOANS to Greece are being described as "giving". There is no GIFT here that I can see.
I understand your point and perhaps did not choose the term wisely, but since Greece isn't ever going to pay anything back, any new loans might fairly be termed "giving". As I wrote, any new loans are essentially a bookkeeping entry anyway, since the majority of it just goes back to the bondholders and the theoretical obligation on to the Greeks.
The point most don't want to see---anger at bankers is apparently more purging---is that Greece cannot sustain itself without "gifts". Wipe away every last euro of debt, and the Greek system is still bankrupt and cannot pay for itself. Greece has two choices: austerity imposed on itself, or austerity imposed by those willing to lend it new money. Since no one seems willing to lend (or give) Greece new money, austerity is unavoidable even if every last cent of debt if forgiven.
I'll add to my own post, which is now frozen in editing time...
This is not Iceland, and will never be Iceland. Those who try to make a comparison are confused.
Iceland enjoyed a wild speculative bubble because it decided to be Europe’s banker. All the UK, Irish, French , etc. money that chased the high CD rates in Iceland was played with by the Icelanders to create domestic bubbles. They couldn’t pay it back, so they merely told the Euro depositors “Sorry”. Their Eurodeposit-fed property bubble collapsed, but they still sold each other fish, cut each other’s hair, etc.
Iceland did not have a large federal deficit nor did it have a poor current account before its banking system collapsed, so absent the Monopoly money asset bubble, the economy and federal fiscal situation were otherwise viable.
Greece is an entirely different animal. Its system is not viable. Once it joined the EU and euro system, it simply could not compete with the likes of Germany and the Netherlands. Its current account deteriorated. Its fiscal situation deteriorated, so it borrowed to fund a lifestyle. It borrowed more than it could repay. Without borrowing, it could not afford the lifetyle it created and wanted to maintain.
Telling the bondholders “Sorry”, like Iceland did to its depositors from abroad, will not make Greece any more able to afford the lifestyle it has, especially if it remains in the euro. They are not suffering because they are paying off the debt, because they are not paying off the debt. They are suffering because their economy as it now exists does not work and they are out of money.
Greece had a pretty decent "lifestyle" before it joined the EU or adopted the Euro.
The "people" didn't force their government to increase welfare spending. Politicians talked to banks. Banks stepped it up and flooded Greece with cash. Millions in fees were generated - for the banks. Millions in bribes were paid out - to politicians. Absolutely, that's how it works. That's how it's done.
Whenever billions in loans are transacted, millions in fees are generated and paid out. To whom? Well, everyone that was involved and made the "introduction". That's how it's done.
No different by the way with the latest "bailout" package. Banks are eager to spend someone else's money. Wouldn't be surprised to find out that between 5% and 10% of the 100 billion package are paid out in fees to various parties.
Why is the UK involved? The UK is staying offshore when it comes to sharing EU liabilities but somehow The City is involved in the transaction of the bailout package. How much does the UK directly benefit from this transaction?
This is as rotten as it gets.
In or community we go after the dealers who get the kids hooked. We go after the perps who lure kids into vans and basements to sexually abuse them.
The community needs to go after the banks that have blown about every balance sheet out there to bits and pieces with their "lure" of seemingly unlimited amounts of cash. The banks didn't have the money to lend in the first place. But the banks have a lobby and they own government. Loans are good for the economy. Cheap loans are very desirable.
Across Europe and North America, cheap loans and economic growth went hand in hand. One couldn't happen without the other. Where did the money come from in the first place? Leverage was increased. Banks and their lobbies changed laws so they could loan alot more than they had in deposits.
The paycheques for bankers were made in huge fees.
Now the well is dry. The economy has "grown" all it can. They're turning off the spigots because they've amassed billions in wealth during the good years. They took it off the top, converted it to tangibles or bought themselves more seats and many more tables.
This is theft. Plain and simple. Those that control the money supply have supplied. Oh boy, have they supplied. Anyone with a heart beat was supplied. Any nation that couldn't afford more debt was supplied with cash. Cash that was printed and circulated without any backing. If oil at $147 in 2008 wasn't the epidemy of a beginning hyper inflation, I don't know what was.
Anyway, too late now. They made off with their wealth like thieves in the night. They need to be taken down a couple notches. Just for good measure.
Nothing like taking over countries with fake money printing. No need for wars with countries which you could not start wars with due to global public opposition. Just make money printing legal (aka fractional lending) and ignore the EU bylaws about not bailing out other countries, and keep lending until you take the helm. So simple and so easy, but no one seems to notice, no one seems to care, just a bunch of walking zombies. We deserve it. Wake up. Look at all the recently appointed (not elected) gov officials in the EU. Gee, nothing strange there.... It's all on that up and up. Keep snoring until you walk into your own slaughter house.
Holy crap!
I'll take the 90% haircut please. That way I'll be closer to the Yul Brenner and won't have to wait out the next three tranches.
Three possible outcomes? Nothing to do but wait and watch mogas prices move higher and higher.
these guys are making lefty driesell and his four corner stall look like the tarks running rebels.....
christ im old...
but it is almost march.....
Four Corners offense created by John McLendon.
Adopted and made notable by Dean Smith who won an NCAA championship with it.
Found to be so terrible an idea that it caused the passage of the short clock rules in colleve basketball.
Lefty! Go Dukes! You have a few years on me.
So boca steals from VPN via zerohedge?
PSST! Blue Whore's-shoe likes Apple EURUSD....
SP allegedly downgraded Greece tonight to selective default.
No shit? Who'd you hear that from?
Press TV
http://edition.presstv.ir/mobile/detail.aspx?id=228982
Huh. And here I would've thought you read it here, around 1629 EST....
Could be BS.
Could be BS.
Story is legit. I suspect this had little practical effect:
http://m.yahoo.com/w/news_america/p-downgrades-greece-selective-default-...
This?
Oh, yeah, because ZH is not as credible as Iranian TV or Yahoo!, everyone goes there first.
shit, my bad. missed that post. monday is not my day.
So you have 2 chances of CDS triggers, 2 chances of not triggering CDS, and 1 chance of nobody knows shit?
You're better off going to Las Vegas. At least the chicks there are better looking than in Greece.
It's time to kill this pig, and stop trying to put lipstick on it.
Greek chicks are hot until 30 and then they turn into rotten figs with bowed legs.
Necrophilia is a great way to describe it.
March 20th is still the date to play out this drama. In the meantime, politician attention whores will continue draft new crisis modes.
anyone taking bets on this shit??
I'l place mine on <75% PSI involvement if the odds are right.
Ain't no way on earth these CDSs trigger. No way. Too much money has be exchanged in plain brown envelopes with too many politicians and rating agencies to let that happen.
Tyler: Can you post a higher resolution image of this "decision tree"? Cant read this one. Thanks
Right click it into a new tab, then zoom as necessary.
Greeks are not pigs. They brought the lights of western civilization and this is the hand they are being given. The Greek people have had about as much say as the people in the US when it comes to their gov getting overrun. Look to the Zionists and Goldman Sachs for some answers as to the planned demise of western civ. The Greeks will galvanize and will not allow to be overrun. They call these countries in Europe pigs. Heck how much clearer can they make the agenda? Wake up before you start finding yourselves squealing.....and the butchers coming after you as well.....
Remember this quote? "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed"
I remember it.
Some don't due to creed. They are anti-truth seeking and pro-supremacy. They are taking the west back to where it started. Long term plans. Look at the countries the US military has deployed into. Look at the countries the UN looks the other way with and which they demonize. Look at who runs the media, the banks, the stock markets, the movies, the big products. Maybe I'm wrong. Sure hope so, but we can't look the other way. Too many sacrificed for a better and more just world. Let's not go back.
well it seems someone has challenged the ISDA before the PSI goes through due to the S&P downgrade
"Under the 2003 Credit Derivatives definitions published by ISDA, a change in the payment priority ranking of any obligation, causing its subordination, is one of the events in restructuring that can trigger CDS for payouts--as long as it results from a deterioration in creditworthiness. "
http://online.wsj.com/article/BT-CO-20120227-715153.html
Thats going to throw a spanner in the greek PSI deal BEFORE it is completed. Did anyone at the recent FinMin meeting anticipate this, probably not.
Meanwhile back at the ranch the ISDA is mulling whether to call the elpida bankruptcy a credit event
http://www.bloomberg.com/news/2012-02-27/isda-says-to-rule-on-elpida-mem...
This is after the Squid (Goldman) and Credit Suisse loaded up on Elpida shares on Friday...
Anyone for a game of pass the parcel of bilateral netting?
“Dans ce pays-ci, il est bon de tuer de temps en temps un adiral pour encourager les autres.”
(In Europe it is good to destroy, from time to time, a nation to encourage the others to pay their debts)
— From Voltaire’s novel Candide, slightly paraphrased to better fit today’s news
this sort of thinking is so ingrained into european mentality and culture of the ruling classes.......
Would it be possible help us ignorant laypeople for the ZH folks track the actual decisions at each branch and sorta point us to which path is being taken. I really try and read all I can to understand what is posted here, but I am very late to the party and my finance/economic knowledge it shamfully lacking...but I am working on it.
Germany cancels MArch 2 Eurozone meeting as She won't accede to G20 warning to increase ESM by 500B, and doesn't want to discuss this subject UNTIL Greece is nailed down.
In the context of PSI incertainty, if the market and ECB/Greece don't see eye to eye and Greece bail-out goes ugly, be ready for all outcomes this summer; including a possible retreat of Germany from Eurozone, especially if the Presidential election leads to a socialist government in France.
Merkel will reconsider ALL of Germany's options in the light of the Greek domino play and the French Core play.
I've been listening to Robert Shapiro on worldwide exchange and he said NO ONE knows the CDS amount and who holds them.
it is done deal, but a risky one! http://www.jinrongbaike.com/ http://www.cnhedge.com/