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Greece Issues Exchange Offer Terms; Raises Minimum Acceptance Threshold To 75% From 66%; €10 Billion Buys PSI Killer

Tyler Durden's picture


Three days ago we recoiled in terror at the stupidity of Greek leaders, when we learned that the Greek exchange offer would be deemed satisfactory if only 66% of bondholders accept it as valid, as it would mean an immediate abrogation of UK-law bonds which have a 75% minimum covenant threshold as specified in the indenture. Apparently this was a "small oversight" on behalf of the gross amateurs in charge of this process as according to the just released full exchange offer doc, this threshold was mysteriously raised to the proper minimum acceptance threshold of 75%. Of course, it is needless to say that at least 25% of Greek bondholders will decline the offer, either in the current Greek law exchange, or the forthcoming UK-law one, which would throw the whole process into a tailspin.  Because here is the kicker, from the release: "if less than 75% of the aggregate face amount of the bonds selected to participate in PSI are validly  tendered for exchange, and the Republic does not receive consents that would enable it to complete the proposed exchange with respect to bonds selected to participate in PSI representing at least 75% of the aggregate face amount of all bonds selected to participate in PSI, the Republic will not proceed with any of the transactions described above." So here's the math: if one has 25% +1 of the €177 billion in Greek-law bonds, they can smash the entire process (and give Germany a way out, wink wink). At today's price of about 20 cents on the dollar, this means that one can hold Greece, and thus Europe (assuming Europe wants Greece in the Eurozone and Germany itself is not the biggest shadow hold out) hostage for less than €9 billion. Or better yet, since the total bonds subject to PSI are about €206 billion, this means UK law bonds of just €29 billion are part of the deal, and one can buy a blocking stake there, at roughly 30 cents on the euro, for a meager €2 billion in cash out today. Furthermore since many hedge funds already have built up blocking stakes, this almost certainly means that Greece will not get the requisite needed votes to pass the exchange. Wondering if these hold-outs are actively shorting the market knowing they can bring Europe to its knees with virtually no capital at risk? You should be.

And 75% is just the absolute minimum threshold: somehow Greece thinks it has a realistic chance of getting 90% to agree to get raped, run over, and crammed down by 4 other classes of senior noteholders:

In addition, unless bonds representing at least 90% of the aggregate face amount of all bonds selected to participate in PSI are validly tendered for exchange, the Republic will not be required to settle any of the exchanges. However, if the Republic receives consents to the proposed amendments that would result in at least 90% of the aggregate face amount of all bonds selected to participate in PSI (including bonds tendered for exchange) being exchanged on the terms proposed by the Republic, the Republic intends, subject to all other conditions being satisfied and in consultation with its official sector creditors, to declare the proposed amendments effective and to complete the exchange of all bonds selected to participate in PSI that would be bound by the proposed amendments.


If at least 75% but less than 90% of the aggregate face amount of all bonds selected to participate in PSI are validly tendered for exchange, the  Republic, in consultation with its official sector creditors, may proceed to exchange the tendered bonds without putting any of the proposed amendments into effect.

And that, ladies and gentlemen, is the German "out", because since Greece will at best get an absolute minimum passing threshold, Germany will just say Nein and call the process abusive.

As posted before, here is the walkthru for the transaction, just replace 66% with 75% in the minimum threshold case.

The full terms of the post-reorg bonds are below but they are completely meaningless as it is almost certain that we will not get to there.



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Fri, 02/24/2012 - 13:43 | 2193258 Deep79
Deep79's picture

So this is bullish right?



Fri, 02/24/2012 - 13:45 | 2193265 LawsofPhysics
LawsofPhysics's picture

... for war, yes.

Fri, 02/24/2012 - 13:49 | 2193287 BigJim
BigJim's picture

  Or better yet, since the total bonds subject to PSI are about €206 billion, this means UK law bonds of just €29 billion are part of the deal, and one can buy a blocking stake there, at roughly 30 cents on the euro, for a meager €2 billion in cash out today.

Paging Iran, hey guys, want to fuck up the banksters? I got an idea for ya...

Fri, 02/24/2012 - 13:52 | 2193301 Cognitive Dissonance
Cognitive Dissonance's picture


Fri, 02/24/2012 - 13:57 | 2193315 French Frog
French Frog's picture

"Of course, it is needless to say that at least 25% of Greek bondholders will decline the offer"

Can someone explain in simple term for a simpleton like me, why ZH is so sure of that; I would have thought that guns would be pointed at the heads of those trying to derail this?

Fri, 02/24/2012 - 14:06 | 2193348 ThirdCoastSurfer
ThirdCoastSurfer's picture

ZH sees hedge funds deliberately building blocking stakes through discounted purchases in a gamble/attempt to trigger credit default swaps for the full value. 

Fri, 02/24/2012 - 14:09 | 2193360 Comay Mierda
Comay Mierda's picture

damn i guess when i tweeted this morning that greece defaults i wasn't really too far off

Fri, 02/24/2012 - 14:12 | 2193378 JPM Hater001
JPM Hater001's picture

We keep bouncing off of 13K...looks like a ceiling until facts appear or the 330 rumor.

Fri, 02/24/2012 - 14:32 | 2193475 slewie the pi-rat
slewie the pi-rat's picture


The Mogambo Guru is Back!

[yes, that's a link!]

Fri, 02/24/2012 - 14:39 | 2193511 Kali
Kali's picture

Yay!  I have missed him so. 

Fri, 02/24/2012 - 14:55 | 2193578 NotApplicable
NotApplicable's picture

*runs off to see the current state of his bunker*

Fri, 02/24/2012 - 15:14 | 2193663 redpill
redpill's picture

Good to see TMM!  This JMR loves the SMC told in the CMW about HSA of Fed Money and following the MSA.


Fri, 02/24/2012 - 15:12 | 2193655 barkster
barkster's picture

That's a spot of good news - i have missed that guy.

Fri, 02/24/2012 - 14:11 | 2193376 They_Live
They_Live's picture

But given PSI of €206 billion why doesn't the ECB just buy up 75% of it at face value? Ctrl+P makes everything so simple.

Fri, 02/24/2012 - 15:10 | 2193650 redpill
redpill's picture

Don't think they aren't considering it.  I'm predicting shenanigans to avoid CDS trigger.

Fri, 02/24/2012 - 17:45 | 2194273 Capt Tripps
Capt Tripps's picture

I swear to God I'm going to pistol whip the next guy who says, " Shenanigans."

Fri, 02/24/2012 - 17:57 | 2194298 Lord Welligton
Lord Welligton's picture


  • From Irish sionnachuighim (I play the fox),
  • Fri, 02/24/2012 - 18:11 | 2194337 unrulian
    unrulian's picture

    hmm..... "Shenanigans"

    Fri, 02/24/2012 - 18:17 | 2194359 Capt Tripps
    Capt Tripps's picture

    For the Culturally Deprived:

    Captain O'Hagan: I swear to God I'm going to pistol whip the next guy who says, " Shenanigans."
    Mac: Hey Farva what's the name of that restaurant you like with all the goofy shit on the walls and the mozzarella sticks?
    Farva: You mean Shenanigans?
    [as they hand the Captain their pistols]

    Fri, 02/24/2012 - 14:28 | 2193457 crawldaddy
    crawldaddy's picture

    why else would the hedge funds make such major moves in this garbage paper if this wasnt the case?


    Does anyone know of any other motives that could of made hedge funds join this circus in the last few months?

    Fri, 02/24/2012 - 15:46 | 2193815 chubbar
    chubbar's picture

    If I was a hedge fund manager who had family and a life in one of these periphery countries I would think just the aspect of potentially maintaining sovereignty for my country would be a motive.

    Sat, 02/25/2012 - 13:32 | 2195722 PhilB
    PhilB's picture

    Bond swap a done deal:

    There has been NO CHANGE to the Greek governed bonds MINIMUM CRITERIA of 66% to trigger the CACs. This is clearly stated in the Memorandum on Friday. Either I am or ZH is confused, so I welcome some informed feedback here.

    This deal looks done because we need 66% of Greek law bonds to trigger the CACs. In order for the bond swap to go bust we would need 58 Billioon Euros on Notional of local Greek bonds to block. This seems very unlikely given that the Greek Banks own the majority of Greek bonds and they are held locally.

    More over once the 66% of local bonds approve of the swap, due to the CACs this will be counted as 100% of the 177B bonds. Meaning that the foreign bonds, which ammount to only 29B (14% of all bonds), alone make it impossible, even if 100% of the foreign bonds were against the swap, to outright block the swap. Furthermore, its is highly likely that once the hurtle of 66% local bonds is met, to get the 90% (since it would require more than 70% of foreign bonds holders to fall below this level).

    So DEAL IS DONE...and ZH conclusions are wrong, I welcome your thoughts.

    Fri, 02/24/2012 - 14:07 | 2193350 bdc63
    bdc63's picture

    Put yourself in the shoes of the bondholder.  Assuming you purchased CDS insurance, you can either:

    A: agree to the deal and get pennies on the dollar


    B: don't sign the deal, let Greece default on the bond that you bought, and be made whole with the CDS insurance that you purchased ...

    Fri, 02/24/2012 - 14:16 | 2193396 carbonmutant
    carbonmutant's picture

    "and be made whole with the CDS insurance"

    Not going to happen.

    This is why they're being forced to accept the 75% haircut.

    The CDSs are like the AAAs the Monolines offered. It works as long as no one tries to collect.

    Fri, 02/24/2012 - 14:31 | 2193465 crawldaddy
    crawldaddy's picture

    true but that didnt stop the cds from paying off in 08.  AIG had no way of paying them off, so the fed came to the rescue.

    Fri, 02/24/2012 - 14:33 | 2193481 walküre
    walküre's picture


    Fri, 02/24/2012 - 15:05 | 2193619 NotApplicable
    NotApplicable's picture

    You forgot the word "sovereign," which Lehman was not.

    Apples and oranges...

    (besides, Lincoln proved conclusively that those who are empowered by unions will destroy everything before they allow  them to dissolve)

    Fri, 02/24/2012 - 15:50 | 2193827 bdc63
    bdc63's picture

    not apples and oranges at all ... its the same damn thing.

    ... and Greece defaulting does not "dissolve" the European Union.  the only thing the EU cares about is ring fencing their banks from the carnage, and I suspect they have already made decisions about how to accomplish that.

    Fri, 02/24/2012 - 16:20 | 2193958 carbonmutant
    carbonmutant's picture

    You mean by hedging the CDSes with more derivatives?

    Fri, 02/24/2012 - 16:46 | 2194053 bdc63
    bdc63's picture

    What a great idea -- I didn't even think of that!  I was thinking more along the lines of Cental Banks buying up all the toxic assets at "par" ... or maybe having all the banks "sell" all their CDS contracts to one bank (say, Dexia) and then stand back and watch it implode (making all the contracts worthless of course) ...

    But creating even MORE derivatives ... I'm liking it!

    Fri, 02/24/2012 - 17:04 | 2194111 Yardfarmer
    Yardfarmer's picture

    but that's what it's all about anyway. derivative growth is going exponential, without even the semblance of regulation. it's the only thing keeping these zombie banks walking and spinning the ever growing hurricane of hyperinflation into a financial black hole. According to Jim Willie, the Office of the Comptroller & Currency  "revealed $8 trillion in notional derivatives put on by Morgan Stanley alone" for Q1 2011. 

    Fri, 02/24/2012 - 20:39 | 2194629 mendigo
    mendigo's picture

    I really don't comprehend what's being said here, but it sounds like your saying that someone (a banker/investor) would volontarily agree to accept less than full payment for a debt. define voluntary clearly psi is a term meant to satisfy the type of people who buy lottery tickets. I would assume real plan is for the public to buy the bad debt - only remains to detirmine the acceptable wording of the transaction

    Fri, 02/24/2012 - 14:33 | 2193484 MsCreant
    MsCreant's picture

    As the fire rages, the firehoses will run out of water and not everyone will get their money. This gamble is a bad idea.

    Fri, 02/24/2012 - 16:30 | 2193994 carbonmutant
    carbonmutant's picture


    Fri, 02/24/2012 - 14:08 | 2193357 EL INDIO
    EL INDIO's picture

    Tyler’s theory is that Germany is setting up Greece for a default so if it turns out to be the case those who refuse the ‘deal’ will do so with German blessing if not complicity.

    Fri, 02/24/2012 - 14:12 | 2193379 slaughterer
    slaughterer's picture

    Lots of phone calls between Elliott Management Corp and Berlin lately. 

    Fri, 02/24/2012 - 14:17 | 2193402 French Frog
    French Frog's picture

    Thanks TCS & bdc: then the bondholders must be really confident that ISDA is not going to be able to evoke some well-hidden rule somewhere that would stop a CDS trigger. How likely is that?

    El Indio: i get it now; there was a post on ZH a few days ago that stated exactly that same view; crafty buggers aren't they, those Germans lol

    Fri, 02/24/2012 - 14:33 | 2193469 crawldaddy
    crawldaddy's picture

    Germany can play the plausible denial card.  Get what they want while being able to say.. we didnt do it.


    Fri, 02/24/2012 - 14:10 | 2193368 iDealMeat
    iDealMeat's picture

    I think this is what Corizne was trying to do..  Buy a block..   It's a banker eat banker world when the sheeple pull back..

    Fri, 02/24/2012 - 14:10 | 2193370 Piranhanoia
    Piranhanoia's picture

    alas,  only a percentage of priceless.  

    Fri, 02/24/2012 - 13:53 | 2193303 Fukushima Sam
    Fukushima Sam's picture

    Damn, I didn't know this whole thing would be so popcorn worthy.  I'm on pins and needles waiting for the next plot twist!

    Fri, 02/24/2012 - 14:14 | 2193390 brooklynlou
    brooklynlou's picture

    Yep. As the Sheep turns ....

    Fri, 02/24/2012 - 15:09 | 2193642 NotApplicable
    NotApplicable's picture

    Meanwhile, out here in meatspace, you'd never know it's even occurring. They all think oil is rising simply due to war fears.

    Fri, 02/24/2012 - 15:36 | 2193774 eatthebanksters
    eatthebanksters's picture

    Do you think Soros is hovering in the shadows somewhere?  I think that hypocritical SOB wannabe kingmaker is drooling right now...

    Fri, 02/24/2012 - 16:55 | 2194090 rrwoodward
    rrwoodward's picture

    I was just thinking about all looks very similar to his currency "check mate".

    Fri, 02/24/2012 - 13:54 | 2193300 TruthInSunshine
    TruthInSunshine's picture

    The private holders of Greek sovereign bonds (and soon, far more holders of far more nations sovereign debt) fate, as portrayed by Monty Python:


    Dead Parrot
    Fri, 02/24/2012 - 15:11 | 2193654 NotApplicable
    NotApplicable's picture

    Well, he's...he's, ah...probably pining for the fjords.

    Fri, 02/24/2012 - 15:59 | 2193876 TruthInSunshine
    TruthInSunshine's picture

    I can't resist a good pun.

    Fri, 02/24/2012 - 18:54 | 2194464 Buck Johnson
    Buck Johnson's picture

    You can bet your last dollar that we will be at war with Iran in a few weeks.  They are ramping up the rhetoric against them.

    Fri, 02/24/2012 - 13:49 | 2193284 EscapeKey
    EscapeKey's picture

    No, but it's priced in already.

    All negative news ever are.

    Fri, 02/24/2012 - 13:49 | 2193286 bdc63
    bdc63's picture

    I don't know if it's bullish, but it most certainly is entertaining.

    Fri, 02/24/2012 - 14:10 | 2193369 Raymond Reason
    Raymond Reason's picture

    It's bullshitish and sad and entertaining.  You've got to have a sense of humor about this stuff, or you'll go mad.  But in a few more years, it may not be funny anymore. 

    Fri, 02/24/2012 - 14:20 | 2193416 Falkor
    Falkor's picture

    ya sure, we just made a new high!

    Fri, 02/24/2012 - 14:56 | 2193582 battle axe
    battle axe's picture

    Just DEFAULT, you are already screwed...

    Fri, 02/24/2012 - 13:44 | 2193261 pods
    pods's picture

    I chuckle about how many times the word "Republic" is used.  

    Doesn't a republic normally function under the rule of law? 

    Only better term would be "sovereign republic (pending creditor approval)."


    Fri, 02/24/2012 - 13:50 | 2193291 bdc63
    bdc63's picture

    'republic' just sounds so much better than 'thugocracy'

    Fri, 02/24/2012 - 14:03 | 2193330 goldfish1
    goldfish1's picture



    "A bankocracy is a country in which every major decision is taken to bolster the interests of the banks." -David McWilliams

    Fri, 02/24/2012 - 15:49 | 2193828 chubbar
    chubbar's picture

    Plus it's easier to spell.

    Fri, 02/24/2012 - 13:48 | 2193262 Cognitive Dissonance
    Cognitive Dissonance's picture

    This car crash just keeps getting bloodier and bloodier. When does the severed head come bouncing out of the smashed Greek vehicle? Oh, right! When the banksta tow truck has hooked Greece up and is speeding off into the night.

    Good luck with that my Greek friends. Shoulda put up more of a fight.

    P.S. I suspect we Americans will be saying the same about ourselves in a few years.

    Fri, 02/24/2012 - 14:05 | 2193342 pods
    pods's picture

    The Greeks will show their disapproval Cog, just takes time to sink in.

    I really hope that the 'merikan sheep will be able to show the same contempt, because this will come ashore here!


    Fri, 02/24/2012 - 14:19 | 2193410 carbonmutant
    carbonmutant's picture

    Americans have to get past the whole political correctness thing in order to be willing to have DHS brand them as terrorists.

    Fri, 02/24/2012 - 14:24 | 2193440 blu
    blu's picture

    All we need is for some former World Wrassling Federation chump to step in and say heck ya'll, protesting and occupying are outlaw, and the streets will be chock-a-block with tubby little posers set out to occupy sumthing. Boo-yah!

    Fri, 02/24/2012 - 15:00 | 2193594 Cognitive Dissonance
    Cognitive Dissonance's picture

    Too freaking funny and way too close to the truth.

    Little Hulksters.

    Little Hulksters

    Fri, 02/24/2012 - 13:47 | 2193263 Mercury
    Mercury's picture

    9 bil./2 bil?? If they're serious why didn't/doesn't the ECB just print (even more) money and buy the bonds necessary to get them to the threshold?

    Or are the Germans just smarter and betting that the rest of the Eurocrats won't figure this out until it's too late and they can kill the deal?

    Fri, 02/24/2012 - 15:13 | 2193660 TonyCoitus
    TonyCoitus's picture

    Maybe they did.

    Fri, 02/24/2012 - 13:46 | 2193270 Marge N. Callz
    Marge N. Callz's picture

    Now where did I put those 2 billion euros..?  It'd be funny if an institution used next week's LTRO money to stop the PSI.

    Fri, 02/24/2012 - 13:47 | 2193278 skistroni
    skistroni's picture

    How absurd, that the only hope I see is the sheer inadequacy and stupidity of the central planners.

    If not now, then pretty soon, they'll walk one step too far.

    Fri, 02/24/2012 - 13:48 | 2193285 slaughterer
    slaughterer's picture

    Don't worry, Elliott has that blocking stake covered.   

    Fri, 02/24/2012 - 13:50 | 2193289 blu
    blu's picture

    Let's see -- what would Machiavelli do?

    Fri, 02/24/2012 - 13:51 | 2193296 agent default
    agent default's picture

    The problem is we will get there.  Everybody is so determined to kick the can that we will get there and we will continue to extend and pretend and continue with the Ponzi until is swallows the entire Galaxy.  The PSI will go through one way or another, even if they have to change the terms at the last moment.

    Fri, 02/24/2012 - 13:58 | 2193323 bdc63
    bdc63's picture

    Usually I would agree, but I don't know this time ... I don't see how they are going to get anywhere near 75%, and that whole UK Law thing really ties their hands.

    Fri, 02/24/2012 - 14:02 | 2193336 lizzy36
    lizzy36's picture

    A hedge fund will only kick the can if incentivized to do so. 

    The have a fiduciary duty to their investors and their personal bonus pools. 

    If anyone can derail this process it is a self interested bonus obsessed Hedge Fund manager.

    Fri, 02/24/2012 - 14:31 | 2193424 reload
    reload's picture

    But the funds holding chunks of CDS must be worried that a trigger bankrupts the writer, andif not `their` writer that a chain reaction bankrupts their prime broker.....and that all their assets are frozen at the leisure of a liquidator. Not good for the bonus, does anybody recall what the notional outstanding is on Greek sovereign CDS? this is shaping up to be some poker game.

    Edit: this from FT/Alphaville - looks like the oustanding Greek CDS is big -- Very big if I am understanding `nett` correctly

    Fri, 02/24/2012 - 17:42 | 2194267 decon
    decon's picture

    No mystery why the TVIX volume exploded.  Big pay outs coming.  Also no mystery why Credit Suisse had to shut it down. 

    Fri, 02/24/2012 - 14:05 | 2193343 goldfish1
    goldfish1's picture

    the entire Galaxy

    We ain't there.

    Fri, 02/24/2012 - 13:54 | 2193305 taniquetil
    taniquetil's picture

    Long 7.62x54R Russian milsurp

    Fri, 02/24/2012 - 13:55 | 2193309 knight99
    knight99's picture


    Lets say we live in fantasy land and they get 8o-90 % to agree will the other 10-20% be forced to accept this deal under CAC or do they no need CAC in order to force them to take deal.  If anyone else knows i would appreciate it.

    Fri, 02/24/2012 - 14:32 | 2193472 There is No Spoon
    There is No Spoon's picture

    As far as I can tell, the PSI is nothing more than a retroactive CAC. Without a CAC the other 10-20% would not be obliged to take the deal so the Greeks/troika/whatever decided to do away with contract law and rewrite the terms of the existing debt.

    (unrelated) the new debt is being issued under U.K. law so that should be fun.

    Fri, 02/24/2012 - 13:56 | 2193311 icm63
    icm63's picture

    So this is the game plan for German, please correct me if I am wrong..

    Greece fails to get bond participation levels, Germans say Greeks failed to meet the terms of bailout, bailout cancelled, Greece defaults, the Banks holding Greek junk lose, until LTRO funds bail them out, and Greece may or may not leave the euro. Result in the market, an update day of 100 dow points.

    Fri, 02/24/2012 - 14:09 | 2193362 Jim in MN
    Jim in MN's picture

    Yes.  Germany needs Greece to be the one to say NO.  Germany says YES but with poison pills.

    And when Greece says NO, the Germans miscalculate: They think they can just walk away.  But a military government in Greece, or civil war, or collapse, is not so easy to walk away from.

    The hole that has already been dug logically requires LARGE financial losses to be incurred across Europe.  The longer they dodge, the larger the bullet that will strike in the end.

    And this is Germany's mistake.  The whole must be made good, or the parts continue to grow. 

    Fri, 02/24/2012 - 13:56 | 2193312 ReallySparky
    ReallySparky's picture

    This is such a stupid game of chicken.

    Fri, 02/24/2012 - 14:01 | 2193331 marcusfenix
    marcusfenix's picture

    yeah...two trains on the same track headed straight for each other.

    so it's not really chicken, it just looks like chicken.

    in reality it's an impending train wreak...

    Fri, 02/24/2012 - 18:23 | 2194375 unrulian
    unrulian's picture

    so...if one train left munich at 2pm and one left athens at 330...

    Fri, 02/24/2012 - 13:58 | 2193321 disabledvet
    disabledvet's picture

    We'll know Germany's position when we see it. Suffice to say "there's more than one Germany" in Germany. France on the other hand...

    Fri, 02/24/2012 - 13:59 | 2193322 carbonmutant
    carbonmutant's picture

    It's amazing the the Greek Parliament is still standing....

    "The Greek military is ready to take over Greece and dethrone Papademos’ led transitional government according to two sources who spoke on condition of anonymity but are high ranking members of the Greek armed forces."
    Fri, 02/24/2012 - 14:15 | 2193397 bdc63
    bdc63's picture


    Fri, 02/24/2012 - 14:36 | 2193499 Ahmeexnal
    Ahmeexnal's picture

    When they do, UN blue helmets will be authorized to rape and plunder Greece. That's been the plan all along.

    Fri, 02/24/2012 - 14:50 | 2193561 brooklynlou
    brooklynlou's picture

    Hello? This is Greece we're talking about. Have you ever tried ordering a cup of coffee anywhere in the country?

    They'll plan to start the coup at 6 AM sharp, but it will be 11 AM by the time everyone rolls out of bed and starts the tanks rolling. Then around 2 PM they'll take a long lunch break followed by a nap. They will all enjoy the nap. Around 6 PM the tanks will start rolling again. Thats when they'll realize that they miscalculated on the amount of gas the old Patton M60's use and they'll send some guy named Mitsos to get more. Mitsos will get lost, eventually find a gas station and after arguing for hours with the owner, he will finally get the gas he needs. By the time he gets back, its 1AM, which is unfortunate since that when the pirate TV stations start playing non-stop porn till the morning. Of course, since this may be their ast night on earth, everyone indulges in a masturbation marathon. They'll all wake up around 11AM again, with really sore arms, but bravely move forward to the Parliament, till around 2 PM when they stop for lunch again ...

    Fri, 02/24/2012 - 13:59 | 2193327 PicassoInActions
    PicassoInActions's picture

    so all those who create this plan are stupid and had no idea what it is? or they have something else on the background..

    I understand that most of them are criminals by any means, but i would be suprised if they are all stupid.

    Something is very fishy.

    Fri, 02/24/2012 - 14:22 | 2193433 bdc63
    bdc63's picture

    I don't think they are stupid, but I do think they are desperate to "buy time", which is really all they have accomplished over the past 9 months or so.  Seems to be coming to an end now ...

    Fri, 02/24/2012 - 14:01 | 2193333 Joebloinvestor
    Joebloinvestor's picture

    Bernanke will buy the bonds, save the sinking ship and be declared a saviour.

    That is what he wants right?

    Fri, 02/24/2012 - 14:05 | 2193346 CrashisOptimistic
    CrashisOptimistic's picture


    But what would seem the correct conclusion here is the blocking security holders are going to be paid at par.  They will make their 5X on investment and Greece doesn't care, this will be a "sweetener" coming from the EU.

    Paying off the blocking bond holders is how you get to 75%.

    Fri, 02/24/2012 - 15:25 | 2193729 bdc63
    bdc63's picture

    They have to treat all bond holders the same.  You can't pay some at face value and then "force" others to take huge haircuts.  If you could, they would have gone down that path 2 years ago.

    Fri, 02/24/2012 - 15:29 | 2193742 TonyCoitus
    TonyCoitus's picture

    Two years ago contract law still applied.......

    Fri, 02/24/2012 - 15:44 | 2193807 CrashisOptimistic
    CrashisOptimistic's picture

    I think you can via the CACs.  The English Law blocking securities are immune to that.

    The Greek law bonds are not.

    Also, and I think this is the most critical part, the blocking securities are owned by US hedge funds.  The EU can threaten the banking licenses of banks in the EU and coerce agreement from them.  They can't touch the US hedgies.

    Fri, 02/24/2012 - 15:27 | 2193737 TonyCoitus
    TonyCoitus's picture


    Fri, 02/24/2012 - 14:01 | 2193334 Raymond Reason
    Raymond Reason's picture

    Divine comedy on the way to hell. 

    Fri, 02/24/2012 - 14:05 | 2193345 Jim in MN
    Jim in MN's picture


    English: Painting by Alphonse-Marie-Adolphe de Neuville, 1873: Les dernières cartouches (The last bullets). French snipers ambush Bavarian troops, hiding in the l'Auberge Bourgerie in Bazeilles, prior to the Battle of Sedan.


    Union, or disunion?  The elites have much to be ashamed of, giving up peace for greed. 

    Take the haircuts.  Let the banks fail.  Tell your soon-to-be-destitute private school roommate that 'shit happens'.  Tell your family the 'dirt' they have on you for blackmail. 

    It is the financial equivalent of war.  Let's not lurch into the real thing over some shiny.

    Cut the banksters loose.

    Fri, 02/24/2012 - 14:08 | 2193353 adonisdemilo
    adonisdemilo's picture

    It looks to me like it's dead in the water, and not before time.

    The FED will have to organise some new printing presses pdq, the ones they're using now will be knackered before they,ve

    printed all the FIAT crap they're going to need to cover the trillions of CDS's.

    Or did I misunderstand when they said they were all netted out to almost next to nothing.

    Fri, 02/24/2012 - 14:08 | 2193356 tobinajwels
    tobinajwels's picture

    So does this means Greece Defaults on March 20,?

    Fri, 02/24/2012 - 14:09 | 2193365 Lord Welligton
    Lord Welligton's picture


    1. <75% and the deal is off.

    2. >75% but <90% and the deal might be on.

    At best a 9.99% hold-out, knowing they are going to be hate figures anyway, have nothing to loose by taking action.

    Even if it is a losing action (CAC?) the delay will scupper the deal.


    Seems dead in the water then.



    Fri, 02/24/2012 - 14:10 | 2193371 Chupacabra-322
    Chupacabra-322's picture

    National Security is deception/Illusion to hide the fact that we are Slaves of the Coporate Banking Global Elite. They have set up a Police State to protect THE UNITED STATES CORPORATION. Ever wonder why your name is in CAPITAL letters on your birth certificate. Yes, unknowingly we've all been given away at birth to debt bondage and slavery to a "strawman". Research it.

    It is not the duty of the police to protect you. Their job is to protect the Corporation and arrest code breakers. Sapp v. Tallahasee, 348 So. 2nd. 363, Reiff v. City of Philadelphia, 477 F.Supp. 1262, Lynch v. N.C. Dept of Justice 376 S.E. 2nd. 247.


    The FCC, CIA, FBI, NASA and all of the other alphabet gangs were never part of the United States government. Even though the “US Government” held shares of stock in the various Agencies. (U.S. V. Strang , 254 US 491, Lewis v. US, 680 F.2d, 1239)

    Social Security Numbers are issued by the UN through the IMF. The Application for a Social Security Number is the SS5 form. The Department of the Treasury (IMF) issues the SS5 not the Social Security Administration. The new SS5 forms do not state who or what publishes them, the earlier SS5 forms state that they are Department of the Treasury forms. You can get a copy of the SS5 you filled out by sending form SSA-L996 to the SS Administration. (20 CFR chapter 111, subpart B 422.103 (b) (2) (2) Read the cites above)

    The IRS is not a U.S. Government Agency. It is an Agency of the IMF. (Diversified Metal Products v. IRS et al. CV-93-405E-EJE U.S.D.C.D.I., Public Law 94-564, Senate Report 94-1148 pg. 5967, Reorganization Plan No. 26, Public Law 102-391.)

    The IMF is an Agency of the UN. (Blacks Law Dictionary 6th Ed. Pg. 816)

    The U.S. Treasury is now the IMF. (Presidential Documents Volume 29-No.4 pg. 113, 22 U.S.C. 285-288)

    And finally,

    There are no Judicial courts in America and there has not been since 1789. Judges do not enforce Statutes and Codes. Executive Administrators enforce Statutes and Codes. (FRC v. GE 281 US 464, Keller v. PE 261 US 428, 1 Stat. 138-178)


    Fri, 02/24/2012 - 14:11 | 2193374 DavidC
    DavidC's picture

    Surely if the CDSs get triggered doesn't this start the whole house of cards falling?


    Fri, 02/24/2012 - 14:13 | 2193384 tobinajwels
    tobinajwels's picture

    That's what I thought could someone elaborate?

    Fri, 02/24/2012 - 14:27 | 2193448 Lord Welligton
    Lord Welligton's picture

    My understanding is that the quantum of CDS on Greek debt is not an issue in itself.

    Will attempt to get link.

    It is more the precedent that will be set.

    If Greek CDS can be called the gates to hell are open.

    That's why, I think, they are desperate to stop the Determination Committee agreeing to an "official" default.

    Hence the "voluntary" nature of the PSI deal.

    Fri, 02/24/2012 - 14:42 | 2193521 Lord Welligton
    Lord Welligton's picture




    Fri, 02/24/2012 - 14:54 | 2193576 Lord Welligton
    Lord Welligton's picture

    So in effect they have unwound 91% of Greek CDS in the last year.

    Which may account for the aggressive attitude of Herr Shauble.

    He thinks is the CDS bomb has been defused problem over.

    German arrogance I suspect.

    Fri, 02/24/2012 - 15:03 | 2193613 Lord Welligton
    Lord Welligton's picture

    That is an excellent piece.

    I am reposting below.

    Could do with a thread of its own.

    Fri, 02/24/2012 - 14:32 | 2193470 bdc63
    bdc63's picture

    Just because the PSI fails does not necessarily mean a "credit event" is declared.  The organization that decides what is and isn't a "credit event" is run by the same bankers that write the CDSs in the first place ... they will do everything humanly and otherworldly possible to ensure that a credit event is not declared.

    It will truly make for a 5 star popcorn moment.

    Fri, 02/24/2012 - 23:03 | 2194865 Banksters
    Banksters's picture


    If cacs are imposed it will amount to a cds trigger.   Going by the numbers presented, it is clear that the bailout will not work if the psi fails.  What the real wiggle room is, remains to be seen.  :0 

    Fri, 02/24/2012 - 14:12 | 2193381 falak pema
    falak pema's picture

    the best solution is for greece to default; lets get there and start from Euro exit of the greek populace who cannot accept this debt servitude.

    Fri, 02/24/2012 - 14:18 | 2193405 tobinajwels
    tobinajwels's picture

    I think that is wise.

    Fri, 02/24/2012 - 14:18 | 2193404 satan2liberals
    satan2liberals's picture

    Suddenly the bonds have more than their intrinsic value to anyone close enough to controling those thresholds.

    Fri, 02/24/2012 - 14:20 | 2193417 SilverFocker
    SilverFocker's picture

    The Greek people must make a choice, they are being charged for a crime the bankers committed. The charge carries a life sentence, yet they can plea bargain among themselves and go at it alone for a couple of years for better long term results....Will Greece become the new Iceland?

    The Greek wedding has been canceled, gifts will not be returned.

    The streets will run with the chant of "NO Deal Bitchez".

    Fri, 02/24/2012 - 14:48 | 2193552 walküre
    walküre's picture

    This is not even about debt anymore. The debt issue is just the vehicle for all these shyster banksters and their political whores to make themselves a nice fat paycheque.

    Just follow the trail of where this is going, who is involved and how its being constructed.

    I know a thing or two about constructing debt deals. This one is rich and it will hurt millions. The banksters and their political whores have crossed a line. This is taking debt finance to a whole new level. This is a declaration of civil war.

    Fri, 02/24/2012 - 14:28 | 2193449 Conman
    Conman's picture

    Interesting, now who would want to deliberately mess this awesome deal up, just to make a trade on it? No one would do that, would they?

    Fri, 02/24/2012 - 14:31 | 2193463 adonisdemilo
    adonisdemilo's picture

     Eventually they'll get round to defaulting properly instead of just playing politics.

    At that time I'd like to remind them that the 29 billion of UK-law bonds are derived from the British taxpayer ie ME.

    Well, perhaps not all of it, it just feels like that.

    Anyway, because in essence I'll be a creditor, can I take my usual 6 weeks on Milos during September and October at

    concessionary rates please

    Fri, 02/24/2012 - 14:35 | 2193495 bdc63
    bdc63's picture

    Sorry ... the bankers have all the hotels in Milos booked up during that period ... but we can probably find you a flat to rent in Newcastle for that week ...

    Fri, 02/24/2012 - 14:45 | 2193537 walküre
    walküre's picture

    And exactly how much in fees does the City gain from lending their LAW expertise in this transaction?

    This is absolutely hillarious. Shilock be proud.

    Fri, 02/24/2012 - 14:33 | 2193478 SmoothCoolSmoke
    SmoothCoolSmoke's picture

    So, why wouldn't  2+3+n = 25.01% of bondholders get together, make a pact to refuse the deal , make a huge short bets on the Euro, then go public that they refuse the deal? 

    Fri, 02/24/2012 - 14:36 | 2193504 bdc63
    bdc63's picture

    that's pretty much exactly what is happening ...

    Fri, 02/24/2012 - 14:41 | 2193520 walküre
    walküre's picture

    Oil is setting up as a nice short again. Shorting oil was THE trade to be made in 2008. Ask Goldman.

    Fri, 02/24/2012 - 14:33 | 2193480 guasilas
    guasilas's picture

    What a nice set up.  PSI fails, but it's all the fault of the revolting speculators who refused to play along. Not only are  Politicians and Eurocrats off the hook, they grab a bit more power for themselves, as the financial world can obviously not be trusted.

    Fri, 02/24/2012 - 14:37 | 2193505 walküre
    walküre's picture


    Take a 74% haircut by March 12th and keep 26% of debt that will likely be diluted to zero anyway further down the road

    Or wait until March 20th and see what happens when the tide goes out..

    Greek debt holders can singlehandedly short all markets and commodities and collect way more if they refuse the offer by March 12th even IF CDO doesn't pay.

    It's gamblin' time!

    Fri, 02/24/2012 - 14:39 | 2193508 Hugo Chavez
    Hugo Chavez's picture

    Kill it.

    I am tired of creeping socialism.

    Fri, 02/24/2012 - 14:42 | 2193519 Don Smith
    Don Smith's picture

    "But since you're an intelligent person, you would expect me to tender the bonds in front of me, so clearly I can tender the bonds in front of you.  But you would anticipate that, so clearly, I can tender the bonds in front of me. Haha! Never argue with a German when Death is on the line! Why are you smiling?"

    "Because I built up a tolerance to debt over the years, and I planned to default on both..."

    Fri, 02/24/2012 - 14:42 | 2193525 adonisdemilo
    adonisdemilo's picture


    As pleasing as the Geordie accent is, I find Greek easier to understand, so, thanks, but, no thanks.

    Fri, 02/24/2012 - 14:44 | 2193528 Peter K
    Peter K's picture

    New Shooter:) Coming out:))))) bitchezzzzzzzz.


    Fri, 02/24/2012 - 14:47 | 2193543 Centurion9.41
    Centurion9.41's picture

    CDS duration is what matters.

    If the CB's can hold off collapse until the CDS's expire, then the threads of the debt can be traced and played.

    If the CDS's have a duration equal to the duration of the bond it insures...

    The bonds insured by the CDS's could be bought by CB's, but to do so would require a stealth buy out with a price sufficient to make the risk v reward to the hedge holder feel the bird in the hand is worth more than two in the bush.

    Of course if such games are played, that only gets the game to one of pure debt and sovereign unfunded liabilities.... which means the politicians would be open to being put in the electoral cross-hairs by their enemies, and the actual cross-hairs of wacko extremists. So that's not an acceptable solution to the technocrats and elite.

    So, the idea is to play the fear game long enough to figure a way out of the maze.

    The easiest way out for mankind is to realize the promises made, the "unfunded liabilities", were lies sold by politicians and face the facts that many of what they were sold on as "rights" were merely the whispers of snakes hanging from apple trees.

    Funny how the world is filled with people who claim rights based on ideals, yet the fruits of all their ideals are not found in spiritual eternity but in material wants.

    Spiritual but not religious, but there's no such thing as evil spirits or Satan.

    Yet when it comes to great measuring stick of material things, there is a "bankster" behind every bank.  A bankster filled with a spirit of the only kind of pure evil that exists in a material based world... a man of greed.

    The politicians lied to you folks.  They lied to you about rights that natural law nor a god ever gave.  And they lied to you about CDOs/CDS' not being insurance products yet said those very same products would insure you receive have all those rights to which they claimed you were entitled.

    Everything else is just a smoke & mirrors game played with numbers.  Like a street hustler working his cards.



    Fri, 02/24/2012 - 14:51 | 2193562 walküre
    walküre's picture

    Most people in finance I've come across are indeed just that. Hustlers.

    Fri, 02/24/2012 - 14:50 | 2193555 vote_libertaria...
    vote_libertarian_party's picture

    So what you are saying is AAPL has an app for BOTH the over and under?

    Fri, 02/24/2012 - 15:03 | 2193570 Bastiat
    Bastiat's picture

    Stockton, CA is planning to halt general fund payments toward several bond issues, with the first payment shortfall coming March 1, the city said in a disclosure statement filed Friday morning on the MSRBs EMMA site.   -- Bond Buyer, Feb 24

    Bankrupcy planned.


    Fri, 02/24/2012 - 15:07 | 2193632 Lord Welligton
    Lord Welligton's picture

    @ Tylers,

    Separate thread for this?

    Got to be educational.

    Italy also has a lot of swaps with banks and it doesn’t post collateral. As interest rates have fallen, the sovereign’s counterparties have moved further into the money and consequently those counterparties have built up increasingly big CDS hedges

    Sovereign CDS can, however, also be used as a more general hedge against the economy as a whole.

    Question for Merkozy: “You supported the ban on naked CDS shorting. For whose benefit was it given that your countries are the #1 and #3 biggest in terms of positions outstanding?”


    Fri, 02/24/2012 - 15:18 | 2193695 amitmittal
    amitmittal's picture

    Seriously, it is simple math

    Greece is out with the offer, with apparently most hedge funds holding more than EUR 2 bln worth at 20 cents to the Euro holding veto power over the aceptance of the hair cut terms. The EUR 206 bn of bonds are due for conversion and as per the UK Law that the bonds migrate to , it needs 75% of bondholders to agree as per the new Collective Action clauses ( 75% is a minimum for it to be upheld under the new UK law ) The earlier Greeak Law bonds are trading at just 20 cents t o the dollar and if less than 75% agree, instead of just a default for the 15 $ in cash and 20$ in new bonds to be issued, the conversion would be a non event as the UK LAw covenants do require 75% acuiescence. The entire 206 bln is apparently trading at just EUR 41.2 bln and then of this anyone holding EUR 10.3 bln would thus be in a position to turn down the offer for everyone else.

    Apparently EUR 29 bln are already UK law bonds but no, it does not make sense that those which would be trading at a min of 30 cents to the Euro or alrdy EUR 9 bln worth as zero hedge mentions would have the same say, because what is going in for conversion is the EUR 206 bln worth and what would be issued is EUR 31 bln worth in Cash for the entire lot trading at just EUR41bln right now and so they can definitely trade above that cash exchange  value plus another EUR 60 bln in face value of new UK law bonds which will trade for another EUR 18 bln worth,, i.e. if converted the package worth EUR 42 blln is going to become EUR 49 bln minimum

    As they say, you can do the math!

    your home for understanding us and europe

    Fri, 02/24/2012 - 15:40 | 2193791 Lord Welligton
    Lord Welligton's picture

    That's not math.

    It is verbiage.


    Fri, 02/24/2012 - 15:45 | 2193813 Lord Welligton
    Lord Welligton's picture

    Bye the bye your website is complete shit.

    Hope that helps.

    Fri, 02/24/2012 - 16:06 | 2193895 BinAround
    BinAround's picture

    Amitmittal...thank you for the analysis.  Your post is a big improvement to the idiotic bloviating of many comments. I wish the ignorant would try to show their wit by unplugging their keyboard.  I would respectfully suggest that we all try to make our writing even more clear.  The subject matter is complex enough without being made even more difficult by imprecise sentences, difficult acronyms, and lack of punctuation. 

    Fri, 02/24/2012 - 16:27 | 2193977 Lord Welligton
    Lord Welligton's picture

    Your post is a big improvement to the idiotic bloviating of many comments.

    His post is no improvement at all.

    I would respectfully suggest that we all try to make our writing even more clear. 

    Why don't you have a go at it and tell us where the errors are?


    Fri, 02/24/2012 - 15:48 | 2193826 BinAround
    BinAround's picture

    One Question:  Why would an investor buy a Greek bond at 30c then vote against the exchange, only to cause default then receive ZERO? 


    Fri, 02/24/2012 - 15:54 | 2193849 Lord Welligton
    Lord Welligton's picture

    Maybe they short sold Greek Banks?

    Fri, 02/24/2012 - 16:04 | 2193892 bdc63
    bdc63's picture

    well, maybe you bought CDS insurance ...

    Fri, 02/24/2012 - 17:25 | 2194197 BinAround
    BinAround's picture

    If a bond holder also bought CDS, he must be sure the CDS will be good, before rejecting the proposal.  The repeated rule changing of the past year eliminates certainty of collecting the CDS.  Anyone care to guess on the probabily of collecting on Greek bond CDS?


    Fri, 02/24/2012 - 19:06 | 2194484 Lord Welligton
    Lord Welligton's picture

    What is the outstanding notional of Greek CDS?

    Fri, 02/24/2012 - 22:44 | 2194829 amitmittal
    amitmittal's picture

    Well, the outstanding notional is $3 bln and that automatically was triggered off at 90% levels of pricing whence all collateral is cash exchanged tso all default CDS are also paid out. Bye the bye , that also means the talk of Greece leaving is pure and simple BALONEY with pricing already almost the cash I willr eceive the exchange and then the juicy penny bonds in exchange that I can trade up for years between the hedge investors and the banks when they get to play...just bye the bye of course Oh Lord!!!

    Fri, 02/24/2012 - 15:50 | 2193835 anyways
    anyways's picture

    Thank you Tylers for ur excellent blog. If i want to know what moves the market, i just have to look here.

    Fri, 02/24/2012 - 16:30 | 2193988 falak pema
    falak pema's picture

    this PSI will be a test to see who blinks first : The ECB/Greeks or the PSI HFs/ISDA guys; its a straight fight between central bank dictat against the market. Lets see how this pans out. A lot of marbles on the roll behind the scenes...

    Fri, 02/24/2012 - 16:53 | 2194082 bdc63
    bdc63's picture

    thank goodness we have ZH for the blow by blow ...

    Fri, 02/24/2012 - 16:34 | 2194008 Diesel Seven
    Diesel Seven's picture


    Do NOT follow this link or you will be banned from the site!