Greece Releases New Proposal With Even Greater Losses To Creditors
The most recent addition to the "I am Jack's complete lack of surprise" pile comes from Reuters, which reports that the latest out of Greece is a proposal for even greater cuts for creditors than previously expected. From Reuters: "Greece's private sector creditors could take a loss of more than 70 percent in a planned debt swap, Finance Minister Evangelos Venizelos said on Tuesday. "There is a very serious discussion based on new facts. We are talking about a PSI much greater than the original," he told lawmakers, referring to private sector involvement in the deal. "We are talking about a haircut on the net present value exceeding 70 percent," he said."
What this means, simply, is that when calculating the NPV of the post-reorg bond, the Yield to Maturity is now less than 30%, and thus is likely going to have a cash coupon of about 3.6%. This is relevant because as is known, one component of the creditor recovery is receipt of EFSF bill in lieu of cash to the tune of 15 cents of notional, and the balance, at least until this point, would have been a 35% yielding piece of post-reorg paper (for a 50 cent total cut as agreed upon in the October bailout). That was the case when the cash coupon was 4%. Going forward, and assuming a 3.6% cash coupon, the return on this fresh start debt drops substantially. Needless to say, creditors will almost certainly balk at this, because when it comes to calculating real yield, most are expecting a roughly 90% recovery at best on the EFSF strip (as every fund will scramble to dump their paper), so 14 cents on the total, and then funds are also hoping for at least 1 year of current yield, i.e., cash coupon. It becomes iffy around the 2 year mark, as it is a roughly 90% probability that Greece will file for bankruptcy yet again just after the first coupon is paid, at least according to hedge fund return calculations. It also means that nobody gives a rats ass about the IRR (as nobody expect to get post-reorg bond principal at maturity), and all are solely concerned with what the cash coupon will be that they can collect for one, max two years.
Which explains why at 14 cents + 3.6 + 3.6 or 21.2, which is where Greek paper trades currently, there is absolutely no upside for creditors, and the only real upside option is to hold out for sovereign debt litigation, where the recovery could be as high as par. Expect no deal to come out of this, despite what the IFF, which now likely represents just Deutsche Bank and SocGen, says. So much for that upper hand.
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I expect the article next week that states Nothing will be given with a side of squat.
Why not just agree to zero as in nada, zip, zilch, nothing, bupkus, use the certificates to wrap fish and chips, line bird cages or filter Sterno before consuming, bless Greece and the EU as they part ways and just be fucking done with it.
After all, there're Portugal, Cyprus, Sapin, Italy....
A veritable plethora of entertainment to behold.
Like my wife, just won't shut the fuck up.
In calculating their latest PSI haircut offer, Greece retained the reputable services of consulting firm Dunder Mifflin.
Welcome to the land of Odysseus!
Can we call this a default yet? No? When return on Greek CDS goes to 10%, then can it be a default? No? How about .5%? Any takers? Any puveyors of Greek CDS out there willing to pay out .5%? Anyone? ...
The longer they sit around and bicker about the PSI/bailouts, Greece is becoming further insolvent until soon there will be 0% recovery after a hard default. Go ahead IMF/IIF/ECB/Fed, yap on about saving Greece.
Yup, Greece is going 'all in' since they have nothing to lose. Damned if they do, damned if they don't. The Troika+1 will have to give them whatever they want to keep the ruling elites in power.
As I have said before - there are lies, damn lies, accounting and, worst of all, Greek assurances.
eurozone creditors will be "voluntarily forced" to PAY instead of being paid.
It's all good as long as they live up to their responsibilities and don't default.
A bankers word is his bond.
...don't forget lawyers
The Greeks will fold... They have no choice. Wake up to the reality. Even if they say no, it won't matter. What choice does the Greek govt have? the Greek people? AND WHAT DO THEY KNOW ABOUT THEIR LONG TERM INTERESTS? Moreover, Where are they guaranteed a referendum? There is no escape (from the EU) mechanism. It is already one govt. Much to the German people's peril, this is the way it is. They will be forced to soak up the profligacy forever. The Greeks think they have something to bitch about...why is no one asking the German citizens? Fukking Greeks should be laughing, 30 cents on the dollar. Seriously? "Hey, we got away with it this time! We can sign now, do it again later!" This is precedent setting. It will never change. The Germans are Fukked. Short EU forever. it will stay together and it will be horrible. Talk about slavery. PITY THE GERMANS.
And STILL, the market would ramp higher even with that event.
I know, but I've always said that there is no way that the private sector will take any deal. Why in gods name take a 70 to 80% cut in value when you can say it's a credit event and get the money back in full via the insurance.
How long ago did Kyle Bass, here on ZH, say that the write down on Greek debt would be 100%?
Kudos to Kyle! He also took physical delivery of a $billion$ of gold from the CRIMEX... and has taken physical delivery of ~ a zillion nickles...
One looking for portfolio manager could do a lot worse than Mr Bass.
Minimum investment with Bass is 5 million. A little out of my league.
Lead advisors are:
1) Michael Scott
2) Dwight Schrute
As has been pointed out over and over . . .
THERE IS NO INTERNATIONAL BANKRUPTCY COURT TO EXPUNGE DEBT.
Greece cannot default. They can announce they default, but no bank has to listen. The banks can carry the debt and compound it forever and keep sending bills. Any Greek asset that ever leaves the Greece borders would be subject to confiscation.
Then there is also the sticky question of how a country that cannot borrow money can buy oil.
Grow more olives?
maybe because im stoned but ....
+10
Except the big banks won't let that happen. It will expose the worldwide ponzi. That's why the world's taxpayers get to keep funding this bullshit.
That's why the euro-oligarchs want to turn the whole world into a socialist state.
OVER MY DEAD BODY.
someone dings me for saying that I would give my life in a fight against the effort to enslave me (explicitly)? Fuck you. And at least have the nuts to tell me why you disagree.
I don't understand who dinged you or Axhme (sp).
If I had to guess, I'd say one of our newly loud & boisterous resident socialists.
Look up...from the the tale of this tape ;-)
Lease military bases to China/Russia.
Greece has a fair stash of gold... I'm pretty sure that Iran would be happy to accept gold for oil.
Screw the bankers, screw the hedgies... they made some bad investments in Greek debt, helped by Goldman Sucks, so let them suck on them for awhile.
Why should an entire nation suffer for the benefit of bankers/hedgies that made some bad investments?
No one put a gun to Greece's head and told them they had to borrow money.
They borrowed money. They have to pay it back. If they can't pay it back, then no one should lend them any more, and no one Damn Sure should be FORCED to lend them more.
You do realize this haircut proposal FORCES the banks to take 30 year bonds at 3.5% at an amount 1/2 their present bond holdings?
You want to haircut the bonds, go ahead. Declare you are cutting them. But you don't FORCE people to do additional lending.
That's what this deal is proposed to do. This is not a situation where "you made a bad investment, now take your loss". This is "you made a bad investment, and now we're going to force you to lose even more, where you had no such risk when you made your original investment".
Be very sure you understand this ponzi bullshit. This is not just taking a loss. This is a government array putting guns to your head and FORCING you to fund extend and pretend.
Greece doesn't have a head, and it didn't "borrow" anything.
BTW, do you realize that your first and last sentences are complete contradictions to each other (in relation to actual people, not political bodies).
Soverign debt is not secured debt. Greece should lift their middle finger and refuse to go along. That would solve another problem at the same time. Poof! balanced budget time. It will cause pain like you read about, but its coming anyway.
WWLD? (What would Leonidas do?)
There is no need for an international court to make such a decision as Greek debt would be governed by Greek laws. Seems like a moot point. As proof I submit that multiple countries have defaulted in the recent past: Argentina, Jamaica, etc. As to seizing Greek assets abroad, that would be tantamount to a declaration of war. After all the Greek debt is backed by the full faith and credit of the Greek government, i.e. totally unsecured, i.e. go suck on a pickle. As to conducting foreign trade, of course that would be possible. All that would happen is Greece would have to pay in advance and run a surplus. It would be a hard reset.
Odious debt...gets them out of debt...look it up...
By the same token, how can banks then confiscate Greek assets?
If the hedge funds have there way and the big banks. It will at most be a 30% haircut.
http://ericsprott.blogspot.com/
A 100% default will trigger a credit event and the CDS payouts. They will not do that. They will write off 70% and it will be classified as a non-credit event. Hedge-Funds and the MF Global's of the world are about to get the high hard one. The ECB will print to keep the markets from freezing and the Fed will follow suit. Equities and anything other than the Dollar and Euro will sprint higher in the election year. Gold will solidify it's historical position as a safe haven ahead of a middle eastern war. IMHO. Then it's anyone's guess.
"Why not just agree to zero as in nada, zip, zilch, nothing, bupkus..."
Because knuckles
Before the Fuck-sy, we must have the dance...
"Like my wife, just won't shut the fuck up."
Can't Help You With That
Look at the bright side... at least you're not married to Merkozy... or is that Sarkle?
Meh, women have to express their feelings -- think of it as equivalent to canaries singing, except you're expected to be paying attention.
http://www.youtube.com/watch?v=5jn1p7SXM1w
First you scrammble to be first to post, then if you can't achieve it, you try to post as close as it is possible to the first one, doesn't matter if it is relevant or not, american way of propaganda dissemitation system
From Armada Markets website: For God's sake, we should ask all global internet providers to ban every website that has Greece, debt, crisis, promise, plan and some other words on the same page.
So...wait a minute...Greece is...NOT fixed?
I can't be bothered with this right now. I'm on my 5th martini during my 3 hour lunch. Luckily I left my drinking bird pecking away on the "buy CMG" button at my trading station.
Domino #1 in motion..
It's whobbling allright.
Dominos anyone?
http://www.youtube.com/watch?v=GPfI9oxZuEo
The Greek government should offer monetary payments to family members for accepting euthenasia for the elderly and degenerate.
Wake me up when they get to the 100% proposal.
Jim Sinclair: ISDA to decide whether 5 Major US Banks go bankrupt this week
http://www.dailypaul.com/209945/isda-to-decide-whether-5-major-us-banks-go-bankrupt-this-week
thank you for posting this
so ISDA, which is owned by the banks, will find the banks insolvent.
here are the owner banks -link
who comes up with this?
Who is going to buy bonds if the insurance doesn't pay. Answer CB. QE to the nth degree.
Well, now I can see what Gross was trying to say today on Europe clossing bell
A new round of mega-lawsuits against banks. MF Globals everywhere.
Something tells me it was the bankers who came up with this!
Let's see, buy CDS on other ISDA backing banks. Declare yourselves bankrupt. The CDS pay up, your liabilities vanish. Not too bad of an idea. Highly unlikely though.
You actually the CDSs will pay? What are you smoking?
LOL, right, so by the same logic, JPM is now first in line to declare itself insolvent and give itself a bailout by voiding all those CDS contract while re-hypothocating all the physical assets in their own vaults. What am I missing here?
You probably don't want to know.
Interesting list Tyler... all the usual suspects plus a few that I hadn't thought of...
Well, in fairness to Jim Sinclair, he did say that the ISDA would likely side with the banks and not do anything that would trigger CDS. Instead though this would kick the ball down the road but eventually result in a bigger problem.
Sinclair figured out that the only response in modern capital markets to an untenable hyperleverage problem is to kick the can down the road?
No, he figured out that things are getting ridiculous and once we get to 100% things can't get any more ridiculous.
i think that theory will be tested, soon
Doesn't whether the banks find themselves insolvent or not depend on how they want to take the subsequent bailout money?
Triggering tens of trillions in gross notional worth of fin CDS will result in a brisk and quite painful end of modern capital markets as we know them.
In that case, I hope they don't pick that option.
To be, or not to be, that is the question:
Whether 'tis Nobler in the mind to suffer
The Slings and Arrows of outrageous Fortune,
Or to take Arms against a Sea of troubles,
And by opposing end them: to die, to sleep
No more; and by a sleep, to say we end
The heart-ache, and the thousand Natural shocks
That Flesh is heir to? 'Tis a consummation
Devoutly to be wished. To die to sleep,
To sleep, perchance to Dream; Ay, there's the rub,
For in that sleep of death, what dreams may come,
When we have shuffled off this mortal coil,
Must give us pause... -- Hamlet
Hamlet was a whiny wuss.
>>>who comes up with this?<<<
Listen to the Ellis Martin-Jim Sinclair interview here--
http://www.youtube.com/watch?feature=player_embedded&v=9802NwSSS6U
What Sinclair says is the ISDA WON'T declare a credit event which would start the dominos falling in the direction of its members...the banks. Quite the opposite...so, expect more MFGs...a lot more...soon.
If the ISDA won't declare an event.....I guess we don't need anymore bail outs of FED printing...
flattrader is hearing what I heard. In summary, they can kick the can but the end is very near. Can they claim a non-credit event with a 90% write down? What about 100%? The day of reckoning is near. 1-2 yrs. max. This of course is assuming the war in the middle east goes our way in preserving the reserve currency.
Well, time to drop some more middle class cake out of the filter press...
The text of the Jim Sinclair interview is on the page below. It is not really anything new or dramatic, but Jim sounds a little more wild-eyed than usual in some moments as vents his anger about CDS derivatives.
All Jim really says is that ISDA - with the major banks as its board members, including the same banks who have written most of the credit default swaps in the world -
That ISDA will not declare the Greek debt haircut 'agreement' to be a default, even if creditors are only promised 30 cents on the euro.
It is a bit of a semantic game, as to whether this pushed - manipulated - extorted 'agreement' is a default or not. Jim Sinclair does not directly address the 'creditors agreement' theme, and rather over-pushes the idea that it must be a 'default' if the bonds are not paid in full, 'agreement' or not, and thus that the big US banks who wrote CDS on Greece, are thus in 'undeclared default' that will be ignored by media.
In other words, an old theme, 'the banks are insolvent' but pretending they are not.
And beyond that, Jim has another theme that ISDA is rigged to act to the benefit of its big bank board members, not the trusting investors who bought CDS 'insurance' ... which ZeroHedge was talking about ages ago.
Going over the top, Jim speaks of ISDA as if it was the bankster class in general, "... more powerful than governments ... " or central banks etc., and that ISDA's eagerness to hide the liabilities of banks by avoiding 'default' declarations, is a major part of the 'QE to infinity' that he sees as flooding the Western world over the next two years.
Instead of listening to the interview, you can read or skim the text here - Jim Sinclair on the Ellis Martin Report, 30 January 2012:
http://www.ellismartinreport.com/node/181
I'm becoming more and more intrigued with the reporting.
It's all about "the purpose of the negotiation is to reduce the burden on Greece of " blah blah blah.
Who says that's the purpose of the negotiation? If you're a bond holder, the purpose of the negotiation is to GET PAID.
Who decided that the purpose of a bank shareholder is to bailout countries?
This shit gets serious the moment banks go public and say there can be no deal without ECB and IMF participation in the haircuts. A bank is a bank, after all. The ECB is a bank. When the private banks start to fight this battle in the public polls, who likely won't see the ECB as different from "any other bank", that's when the shit hits the fan.
You see, if there are ECB and IMF haircuts, the private banks take less of a haircut. It's in their best interests to drag the ECB and IMF in and let the public (voters) see the "imbalance".
I am no bond trader but i posed this question yesterday and had no repsonse but willl repose it today...the thought process is very basic...
example
JPM has 4.5 billion $ in debt exposure to Greece
JPM has 2.1 billion $ in CDS's against the Greece debt....
so if the PSI (JPM) is willing to take a roughly 80% haircut and the CDS's are not triggered does the CDS's get reduced by the haircut size as well????
If so JPM loses 4.28 billion $..
The true prroblem is as a prvious ZH article has so perfectly put it----if ISDA does not trigger the CDS's on Greek debt then the entire CDS's market becomes worthless.
If this is the case and the CDS's market is manipulated, essentially making all CDS's worhtless by the fact that noone can predetermine what a default will be, there will be rampant selling of these so called insurance policies , and why would anyone/ institution own something that may or may not do what it is designed to do "protect the owner from a credit default".
So heres a question I have not seen posed, will the big banks who currently use those CDS's as hedges in terms of risk. have to mark their CDS's as a 50/50 proposition of redemption or close to it? If so wouldn't this elevate their leverage ratio's? So inessence they would either have to own more CDS's or sell their debt...either way it is a very big problem...
The CDS's must be triggered and therefore somewhere there is going to be some major pain for the underwriters and eventually the market.
Any thoughts on this would be great
After listening to the Sinclair interview and seeing your analysis, I think I finally understand this.
I'm sorry that I can not add value but my thoughts on this is that no one private party would buy this crap
ever again.
I would like to know what percentage of the CDS contracts held by JPM are considered "assets" and what percentage are considered "debit". All these fuckers are counterpary to each other.
It would be interesting if the vast majority of CDS contracts held by JPM were actually debts to be paid. If all the CDS contracts were deemed "worthless", presto JPM re-hypothicates all those real assets in their vaults and pushes for tougher mark to market rules with their much-improved balance sheet.
So, basically it's the final scene in the Reservoir Dogs where all the bad guys had guns pointed at each other.
If they trigger, the CDS issuing banks go tits up (no way they have capital to pay out). If they don't trigger, all the suckers holding greek debt go tits up (they suddenly become "un-hedged"). The CDS issuing banks get to pick door number 1 or door number 2.
How about whats behind door number 2?
DING! DING! DING! You picked a door with a bonus prize. What is in the special envelope?!?! Why, its QE3!
This whole charade feels like an Escher painting; I am going to fall off the floor onto the ceiling and break something!
Regards,
Cooter
>>>DING! DING! DING! You picked a door with a bonus prize. What is in the special envelope?!?! Why, its QE3!<<<
FWIW Sinclair indicates Global QE3.
So that 2.1 billion in CDS is made worthless, can't they just sell it to the government for 2.1 billion?
"The true problem is as a previous(sic) ZH article has so perfectly put it ----if ISDA does not trigger the CDS's on Greek debt then the entire CDS's market becomes worthless."
Not if the CDS's are not allowed to be liquidated and instead are 'validated' by the cabal of banks themselves as a "valid asset" with some arbitrarily assigned value.
Remember the 'toxic assets' of TARP fame? They were supposed to be bought, but after actually looking at the festering pile of feces, the Fed/Treasury said 'keep 'em', and oh, by the way, mark them at whatever value you think is appropriate until we can build your capital up enought to take the hit, or, the market recovers enough that they actually have some substantiatable value.
BB13
I thought ultimately those toxic assests are destined to be bought by the good old government. Is that wrong?
Interesting...interview with Jim Sinclair who suggests 5 major US Banks may go down the tubes this week.
Breaking News Ellis Martin Report with Jim Sinclair
Holy CDS...ISDA about to weigh in on defaults.
The Obama Administration would never let this happen.
Sadly.
By Obama admin I think you mean Fed, which has no ties to any governmental institution, except that the POTUS nominates the Fed Chair and Congress votes on said nom.
The Fed would never let this happen.
Not gonna happen though, because the banks are the ISDA.
agreed -
US banks go under? Say it with me...
Will..
Not..
Happen..
I expect the discount window to be at new highs this week.