Greek Bondholder Talks Stalled, Agreement Unlikely By Monday Deadline
We will shortly present an extended analysis of just why the broader media is once again wrong in their interpretation of who has the upper hand in the Greek bankruptcy "fresh start" negotiations (because while Greece may not have formally filed bankruptcy, or insolvency, or whatever one wishes to call it, the talks right now are basically determining what post-reorg Greece will look like, and specifically its fresh start accounting balance sheet with or without an EOD trigger), and why hedge funds have controlled the process all along.
In the meantime, we were not at all surprised to learn this morning that not only has an agreement not been met ahead of Monday's critical Eurozone FinMin meeting (the first of many for 2012) in Brussels, but talks have "stalled". Dow Jones reports: "Talks between Greece and its private sector creditors over a debt writedown plan appeared to stall Saturday as the banks' top negotiator left Athens amid signs of fresh disagreements over how much Greece would pay its bondholders in the future. Officials close to the talks said they may not conclude before a meeting Monday of euro-zone finance ministers where a second bailout which will keep Greece from defaulting is supposed to be discussed. Without a deal on the write-down of the debt held in private hands, the loan can't be released. Institute of International Finance chief Charles Dallara, who has been negotiating with Greek officials on the bond swap plan for the last two days, left Athens Saturday as hurdles remained over the interest rate the new bonds would pay private sector creditors. "Right now there are no talks. There will be consultations with the EU and the IMF to determine where we stand and then we'll see. It (negotiations) has again become complicated with the new demands over the coupon," said a person with direct knowledge of the talks." Which is why any statements that Greece, or the ECB, has all the leverage are total rubbish - if Greece wanted to get the deal done over Hedge Funds' dead bodies, it would have. It hasn't. And yes, a forced cram down of UK-indentured Greek bonds is still a possibiliy, but we will shortly make all too clear that should Greece proceed with this last ditch scorched earth approach, it would mean a complete overhaul of the entire PIIGS bond market, and why a sell off in €800 billion of it would be imminent.
In the meantime, some more details from Dow Jones:
IIF spokesman Frank Vogl said that Dallara had a personal engagement in Paris and had to leave but that a team remains in Athens. Dallara is not expected to return to the Greek capital over the weekend.
A Greek Finance Ministry official said the IIF chief will continue negotiations with Finance Minister Evangelos Venizelos by phone later Saturday.
The talks, which started up again this week after nearly breaking down a week earlier, come as Greece scrambles to put together a debt-restructuring plan ahead of a Monday meeting of euro-zone finance ministers in Brussels where the debt deal is expected to top the agenda.
However, this now appears unlikely.
"We may not be able to reach a deal before Monday's eurogroup. This is unfortunate because the finance ministers were supposed to have crucial talks on the (second) bailout loan provided there was a deal on the haircut," a senior eurozone government official said.
What this means is that with the March 20 cash outflow "hard deadline" now less than two months away, and absolutely no trace of a deal on the table, the haed default deadline is starin Europe in the face, even as everyone has been giddily gobbling up risk assuming everything is taken care of.
Reaching a deal with private creditors is a key precondition for Greece to receive a fresh, EUR130 billion bailout from its European partners and the International Monetary Fund.
The aim is for a voluntary restructuring of some EUR206 billion of debt Greece owes its private creditors by exchanging old bonds for new ones worth half the value. That would wipe out EUR100 billion worth of Greece's EUR360 billion debt pile--saving the country some EUR4 billion a year in interest payments--but forcing steep losses on bond holders.
The two sides appeared to be closing in on a deal that would give creditors new bonds paying a 3.5% coupon for shorter maturities and rising to a cap of 4.6% on longer-dated bonds. The average coupon would amount to around 4%
Earlier, people familiar with the matter said that the IMF and Germany don't believe Greece's debt would return to sustainable levels if the average coupon on the new bonds is around 4%, pushing for a lower coupon.
"We were discussing technical and legal issues having agreed in principle to an average coupon of 4%, but the IMF insists this won't be enough to bring (Greece's) debt back to sustainable levels," said another person with knowledge of the talks. This is the second
intervention by Germany and the IMF in debt talks in the last eight days over the coupon rate.
Reuters adds that the ever-cheerful Dallara (who had a "sure deal" when Greek bonds were trading about 300% higher), has now left the country:
The representatives of Greece's private creditors left Athens unexpectedly on Saturday without a deal on a debt swap plan that is vital to avert a disorderly default, sources close to the negotiations told Reuters.
Negotiations will continue over the phone during the weekend but it is unlikely that an agreement can be clinched before next week, the sources said, as Athens races against the clock to strike a deal.
The IIF said on Friday that the elements of the deal were coming into place, adding: "Now is the time to act decisively and seize the opportunity to finalize this historic deal and contribute to the economic stability of Greece, the euro area and the world economy."
And to think: a €9 billion hedge fund blocking position is all it would take to kill all this "decisiveness" and the "opportunity." Much more on this topic shortly, in a post to cover the downside scenario, which now appear inevitable, next steps.
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A Greek default is priced in.
Could lead to civil war.
I don't think that has been priced in just yet.
Portugal to follow suit?
Portugal default: Priced in.
USD====>IMF======>Greece, Portugal====>Austerity Discussions(Cafes, Sun, Wine)====>Rewind
Wow. Bloomberg was offering a different story yesterday.....laced with some good ole hopium.
Greek Debt-Swap Accord ‘Coming Into Place’http://www.bloomberg.com/news/2012-01-21/greek-debt-swap-accord-coming-into-place-creditor-representatives-say.html
Doesn't sound like it's coming into place. Maybe into "a" place....a place of more frustration, deadlock and failure!
Bloomberg isn't the only retard factory in the media reporting all is going to be fine, a deal is in place, etc...
The crack rock these loons are hitting must be ginormous!
Oh the difference 1 day can make...or 2 hours...or just a source of information that isn't totally captured by TPTB...
Don't think so. Basically the EU/IMF will make certain that Greece will be so thoroughly crushed and ground that no other country will want to go ahead with a similar debt reduction process. The Greeks don't get that this PSI nonsense will turn out far worse than an immediate and outright default.
Don't forget the old mantra that when you owe the money, the debt enslavers own you. However, if you owe the enslavers huge and unpayable amounts of money, you own them.
Greece is not the one who is desperate here.
For he 90th time, there is no default.
If Greece were declare they are not repaying the debt, the banks can just nod and smile and ignore them, and continue to compound the interest and penalties forever. If Greece then ever holds an asset outside Greece or the EU, the banks can get a local court to confiscate it.
This is forever. There is no default. A sovereign default doesn't work. It used to be if a country owed another money, and then did not repay it, it would mean war and annexation of territory.
Banks have no armies, and even if they did, Greece doesn't have assets inside Greece that could be confiscated. The last thing banks want is a sovereign state of their own so they don't want territory, either.
So forget defaults. They don't exist.
You cannot confiscate anything from a sovereign government. That’s the entire idea of being sovereign. There is no recourse for the bond holders.
Of course you can. Greece has state owned shipping.
You can't = no law allows it.
I would think a default would be similar to a bankruptcy. The slate is wiped clean and nothing can be collected, no judgement against the creditor remaining, nothing owing.
It would be, but there is no international bankrupcy court.
Simply that. Greece can declare they won't repay the debt. The banks don't have to listen. They can compound the numbers and send requests for payment every quarter. Greece ignores it and can never hold assets in overseas banks.
There is no law on this matter. The Greeks borrowed the money. The creditors want their money back. Period.
There is no bankruptcy court with international jurisdiction.
You're such a fucking idiot and wrong on every point
WRONG . they're trying to change greek law now so that bond holders can take assets from their government in case of a default. as it stands now bondholders in an event of a default get what they deserve nothing.
the greeks need to start lynching some politicians if that happens
You're full of shit. Plenty of countries have defaulted and I haven't seen their assets seized.
So nothing changes until people are hungry.. I am glad you all say this better than me, no rule of law, means no contracts, no CDS, no derivatives no nothing just a slide into fascism cheered by the complicit media and the completely soporific sheep..
jocuri cu bile it would mean a complete overhaul of the entire PIIGS bond market, and why a sell off in €800 billion of it would be imminent. ben 10
If I owe the bank $1000 it's my problem. If I owe the same bank $1000000000 it's their problem.
Like I said before: hedgefunds win if Greek defaults. first they cash out their cds, then their shorts on the market will pay off big time, way more than any loss on the bonds. it's cold calculation and cold hard cash.
I suspect the counter party risk is immense. Thus the reason it will not be triggered. Even if the losses are 70%.
Plus, being off balance sheet, does anybody know what was the total value of the insurance bought? $100B?...$500B...$1T??? You don't have to own the bonds to buy the insurance.
exactly right. This shit show is fascinating. My dog tootsie might have some Greek/piigs CDS for all I know, but the big catch is that's a bet you do NOT want to end up winning for a number of reasons. There is no right answer for either the hedge funds or Greece! Get ready for some blood shed my friends.
Does your dog work for Goldman? I'd be more worried Tootsie is selling CDS, on margin.....
No, but she would be a good nomination for the next treasury secretary.
Correct me if I'm wrong but Lucas Papademos is still the Prime Minister of Greece and Evangelos Venizelos is the finance Minister.
As I understand it both are owned by Goldman Sac's, and Papademosis' a member of the Trilateral Commission (possible Bilderberger?). What are the chances that either of these two are acting independently? What ever happens with Greece on the 20 of March will be what is planned to happen.
A bigger question is who are writers of CDS's at this point. If the hedgies win on a default, the bigger banks win on a default, who is selling the protection?
It'll be the "smaller" banks then. But not to worry they have all passed the ECB capital stress testing criteria. What's that funny smell of burning garlic and spaghetti?!
US German French UK banks and Insurance companies e.g. Allianz
Virtually every bank of size in the world is insolvent no one is paying on the CDS which is why there will not be a payout.. Ben and the boys will just change the rules, no law or contracts no problem..
I don't know who is selling the insurance, but I know who will be paying.
US taxpayers
they never are, are they. One of my all time favorites is going into the collapse of 2008 "financial services have now discovered a business model that makes them immune from the business cycle." Yeah right!
It matters not, move the deadline. The new age solution to all difficult problems is to always appear to be working on a solution but to never actually have a solution. Same as it ever was.
Exactly. They'll just redefine everything again and again and again. Throw in a couple of 'meetings' of the G20 and they'll just perpetually delay everything.
Seriously, who gives a fuck now? It's a make-it-up-as-you-go world now.
They've been doing that for 2 years on Greece. Time's up.
The problem with that scenario is they run a huge deficit.
They have to fund it. Germany says no. Their interest rates are so high they can't borrow privately.
I would agree with you if the delay delay delay only applied to the old debt. There is, however, a difference between dragging out interest payments and borrowing new debt.
No one will lend.
Let's all take a step back and remember that all these fixes are just new debt. They are borrowing new money to make interest payments and EVERYONE involved is carefully ignoring what happens after they cobble together a tranche for March. They will then have new debt earning new interest, fiscal contraction of GDP and another tranche required in June.
This is not my beautiful ponzi scheme.
Obscure Talking Heads reference +1
"And you may ask yourself: My God, What have I done?"
ponzi works on the upside and downside. It's about feeding the direction and has no basis in reality. Ponzi is a bidirectional, the outcomes the same. BUST!
The upside is perpetuated by easy money as is the down side. The key is who profits; and by profit i mean financially, economically, politically and militarily.
The euro mess is really a political power play. The US housing ponzi was a financial play that morphed into a political and soon to be military play. The way i see it, the only way for the US to maintain its standard of living is to own the present value of the future value of oil. The worlds most valuable resource.
Is a Portugese and Italian default priced in?
Priced in!
Damn those Europeans are good... I still have a tough time "pricing in" how much I have to spend on a dinner tab to get some bunga bunga at the end of a date...
"In" is all that matters. "Pricing"...less so.
How much you have to spend? Good lord, you are giving it away for free or paying for it? I've never paid for it in my life. Paying for it is sexist..treating women as sex objects and treating yourself as a money or career object.
Are weak earnings priced in?
Day after day, I sit here and think to myself: "This is it, this is finally the trigger. The system is finally going to clear and we can get to work on starting over." But alas it never comes It's hard to wait.
Hard to "Transform", when you're in stasis-lock! :>D
How is this possible? I read just the other day that the bailout agreement had just happened.
Of course it read the same thing the week before. and the week before that. And the week before that.
In fact, the central bankers have saved the financial world from its own screwups pretty much every week for the last several years.
Fear not say the Euro Polyannas...
Europeans have emotionally priced it in.
Sounds VERY bullish to me then :)
Can someone explain how you can just change the bonds from Greek law to UK law.
If they were sold under UK law in the first place, not uncommon, they are subject to UK law.
International creditors prefer debt issued under English law as English courts are widely viewed as being more likely to rule neutrally on any dispute that arises, and English commercial law is well defined and well understood globally. By contrast, no one knows Greek law and no one trusts Greek judges to rule against Greeks. As a result, much of the international securities market is issued subject to English law regardless of the nationalities of the debtors or creditors or the currency of contract.
Thank you.. so do we know how much is under UK and how much is under Greek Law?
Does it really matter and can they just change it?
I believe about 90% was issued under Greek law.
It turns out, over 90% of Greek debt is governed by the terms of Greek law. Which offers much less protection than the UK laws governing the remaining ~10%.
Here's the link:
http://financeaddict.com/2011/10/greek-cdsshenanigans/
ooops. "I'm sorry...Credit Default Swap doesn't translate into Greek. Could you say that term again?"
Its translation is "Ghamesso "
3. Collective Action Clause (CAC)
One would think the Greek government could retroactively apply CACs to ALL Greek bonds, even after they are signed.
All EU courts would uphold the move.
But it may be that the hedgies would file suit in US courts. That would be interesting. One is not supposed to be able to change a contract after it is signed, but I'm sure lawyers could dig to find precedent if that is what is required to keep the juggled balls in the air.
"One would think the Greek government could retroactively apply CACs to ALL Greek bonds, even after they are signed."
Even the ones held by the ECB?
"All EU courts would uphold the move."
The UK courts might uphold the move but declare that some of the bondholders were coerced into it as it was retroactive. Hence why the bondholders want UK law.
Tell that to senior GM bond holders.
Calvinball -- who wants to play?
Calvinball -- who wants to play?
[edit:] All right, what is going on with the site today??
Keiser report just put it right.. the Greek have the trumps. Let 'em default and wipe off the dust after settling.
FUCK ISDA.
What were the odds?
Damn near 100%? And to think they have only had 5 months to close this thing.
Pretty sure a dork could close a cheerleader faster than that.
That's not saying much. Cheerleaders is easy.
Weren't W and his Halliburton built drone clone Rick Perry both cheerleaders?
Sounds like you want to toss their salad.
Not back in my day. Cheerleaders were like trophies. Bag one and you're a hero.
If you are in med or law school.
or a feetsbawl playa
Actually, I have some experience in the dork to cheerleader area and it takes a good nine to eleven months to close a cheerleader with considerable effort and investment. You need a little alcohol and unresolved daddy issues to get closer to the five months.
However, getting the cheerleader to "go greek" was beyond my abilities at the time...
If i could have given you a +100 for that comment i would have.
Thanks for the laugh.
Thanks Lizzy - nice of you to say.
so if i loaned you some money and you refused to pay me back would you sue me in Human Rights court too?
How about if i actually violated your human rights?
Not if you go greek.....
No problemo. I once had a cheerleader tell me we had to go Greek because she was holding out for a med student and she wanted to stay a virgin to show him to help close the deal. Go figure. Welcome to UNC-CH!
Am I the only one that's become completely desensitized to all these Greek "the end is near for Greece" news that seem to occur every 5 minutes?
No, you are not. Everyone has priced it in.
no doubt the plan all along. can't fix the problem... but you can manipulate the reaction.
You realize they'll just find a way for this not to be a credit event....right?
Markets, especially banks, will fucking soar on this news....I shit you not. They have that kind of control on the equities markets.
Spillover effect to Portugal already being felt as yields climbed to Euro-era high. Speculation that Portugal will imminently try to enforce haircuts as the next weakest link
http://blogs.reuters.com/macroscope/2012/01/20/portugal-falls-victim-to-...
From the article: The thinking is, if Greece gets private bondholders to write-down losses on their Greek bond investments, thereby reducing its debt load, what’s to stop struggling Portugal from seeking to do the same?
I think the ECB/EU has pretty much given up on Portugal. Their reform program is not working and the economy is spiraling down.
One Europe is done with Greece, they will turn to deal with Portugal. Expect some PSI deal in Portugal during 2013.