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Greek "Fresh Start" Bonds Face Immediate 80% Loss, 98% Probability Of Redefault

Tyler Durden's picture


As 'news' breaks of over 80% participation in the Greek PSI deal and the apparent optimism that this is somehow a good thing, we note that our analysis of what would happen from two months ago was exactly spot on. As the FT reports, "financial markets were already betting Greece would default again in the future. Grey market “when issued” pricing for the 20 new bonds were ranging from 17 to 28 cents on the euro, a highly distressed level, according to indicative quotes", which just happens to almost perfectly coincide with our view:

"since the Greek Debt/GDP will still be over 120% according to another set of rumors (after all, only a small portion of the country's debt is really getting impaired), it is 100% safe to say that in 30 years Greece will still go bankrupt. So let's say it deserves a comparable yield to its current 30 year bonds, which are priced to yield about 23%. We are being a little generous and estimate the fresh start bonds will yield 20% post break. Which means that according to a generic bond yield calc, the price on the fresh start bonds post reorg will be... 17.9 cents of par, or immediate losses of over 80% the second these bonds break for trading from par."

Simply put, as soon as these 'new' bonds hit the secondary market they will reprice from 'par' down to around 20 cents as expectations of default sooner rather than later (and with 98% inevitability given grey market CDS and bond pricing)  leave Greek bondholders with more losses to come and the Greek people inevitably facing tougher austerity to get the next PSI deal through in perhaps six months to a year...

Furthermore, for those looking at the trend of participation news today and expecting it to rise any further, just as we have noted before many times, the FT confirms:

In addition, the status of the 14 per cent of Greek debt not issued as Greek-law bonds, most of which are bonds governed by English law, remained unclear. According to a confidential analysis prepared for eurozone finance minsters last month, 95 per cent of all bondholders must be included in the debt restructuring for Greece debt to reach 120 per cent of economic output by 2020, the target of its new €130bn bailout.


Greece cannot reach that target with Greek-law bonds alone, and Athens may need to wait until a meeting of foreign-law bondholders at the end of the month to know how many will join the restructuring.

For clarity, here is Peter Tchir (of TF Market Advisors) perspective on the day's events:


Papademos Says Expects Maximum Participation in Greek Debt Swap


I'm not sure why 100% isn't maximum possible, but math and Greek politicians don't seem to go well together.


I expect a number between 75% and 98%. I expect every bank and most regulated entities to vote for it - how many Greek bonds are held by Europe's bad banks and bailed out banks? My guess is it's a disgustingly high number.


Below 75% and my guess is they accept those offers and default on the holdouts - but only after extending the offer for a few more days.


Between 75% and 98% they use the CAC and try and move on. There isn't enough time between now and March 20th to do anything more interesting.


Above 98% I will go and try out for the giants as starting quarterback, because clearly anything is possible. But if it is somehow above 98% (CDS is 1.5% and I expect mostly held in basis and no incentive to agree).


I don't think it makes much difference whether the number is 77 or 95. All we will really learn is if any banks didn't feel obligated or which hedge funds decided the plan was ok. Maybe the market will react differently if it is 77 or 87 or 97 but it really shouldn't.


The Credit Event will settle smoothly. It is the net that matters, not the gross, and the net is relatively small. Any bank that doesn't have money to pay on CDS they wrote, after LTRO is beyond inept. Any banks without enough collateral from any hedge fund that sold them protection is equally inept - though this should be an exchange based product or at least cleared.


The potential knock on effect will be if banks demand larger collateral requirements going forward and if other sovereign bonds start leaking again - especially since LTRO has margin calls of its own.


I doubt we get a Credit Event until next week- as they likely won't do it late on a Friday.


If we find out that the invitation has been extended I would get concerned that they didn't hit the 75% threshold.


Some English law bonds might have to be dealt with separately if there were blocking votes, but there is time for that.


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Thu, 03/08/2012 - 14:39 | 2236719 bugs_
bugs_'s picture

paging Mr. Vaporized

Thu, 03/08/2012 - 14:43 | 2236736 JPM Hater001
JPM Hater001's picture

You mean Gross is not Net?

Huh, who knew.

Thu, 03/08/2012 - 14:45 | 2236752 Harlequin001
Harlequin001's picture

heh, heh, heh, and gold is still trading at...wait for it... zero from par...

Thu, 03/08/2012 - 14:56 | 2236798 Ahmeexnal
Ahmeexnal's picture

Anonymous "hacks" the Vatican:

How long until Wikileaks/CIA releases evidence that the Vatican Bank is the one holding the gold that was once parked on Fort Knox?

Thu, 03/08/2012 - 15:07 | 2236830 john39
john39's picture

if it does, you can bet that the gold is stored elsewhere, likely in deep bunkers under the rothschild mansions in Europe and Tel Aviv...    

Thu, 03/08/2012 - 15:16 | 2236864 Ahmeexnal
Ahmeexnal's picture

In answer, Nicodemus said to him: "How can these things come about?"

No, they are stored in the vatican vaults. Time to occupy der heilige stuhl


in god we trust NO MORE

Thu, 03/08/2012 - 19:06 | 2237626 Buck Johnson
Buck Johnson's picture


Thu, 03/08/2012 - 15:11 | 2236854 resurger
resurger's picture

fort knox has gold O_0?!

Thu, 03/08/2012 - 15:08 | 2236834 tempo
tempo's picture

No matter how much BS the media puts out on the success of the Greek debt, gold just keeps outpacing equities. MDC coming in below estimates on same store sales can't be good for equities.

Thu, 03/08/2012 - 14:49 | 2236758 macholatte
macholatte's picture

The road is long, deep and wide.... the can shall be kicked.


'So it is written so it shall be done'

-- Ramses II

Thu, 03/08/2012 - 14:52 | 2236784 Josh Randall
Josh Randall's picture

"Can you DIG IT ????"

-- Cyrus

Thu, 03/08/2012 - 15:04 | 2236820 trebuchet
trebuchet's picture

Tyler/Peter the ppoint is: if CAC trigger and CDS trigger and CDS ONLY pay out to holdouts, this is a grand slam success restructuring


Post greece, we can worry about that on monday


So my question is, is that how CDS/CAC is going to work?

Thu, 03/08/2012 - 15:41 | 2236948 spastic_colon
spastic_colon's picture

Participation will be 75-85% and CDS overhang about 3 billion....a drop in the bucket

Thu, 03/08/2012 - 15:43 | 2236951 Schmuck Raker
Schmuck Raker's picture

Seems to me "...grand slam success restructuring" might be a bit of a stretch with 120% Debt/GDP after the deal.

Thu, 03/08/2012 - 15:11 | 2236856 delivered
delivered's picture

The Warriors. Great movie as maybe the Greek people should start to organize in similar gangs that roamed NYC in the movie. They can band together, bottles on their fingers gently tapping together and chanting to the bankers "Banksters, come out to playyyeee".

Thu, 03/08/2012 - 17:34 | 2237325 Calmyourself
Calmyourself's picture

Geez, we are dating ourselves with the Warriors aren't we...  Greek Bondholders come out and play, clink, clink, clink, bondholders come out and playyy..

I hit post, looked up and their you were with yours a little weird..

Thu, 03/08/2012 - 22:42 | 2238333 delivered
delivered's picture

Yes we're giving away our age but when it comes to lasting movie quotes, I just can't pass on replying. The timings a little weird, I would agree, but when Cyrus speaks, its time to respond. So we both must of have been listening to a higher voice and thinking about the same scene towards the end of the movie when the villian gang (can't remember their name) met the Warriors on Coney Beach. Just remember how scratchy and edgy the gang member's voice was when he kept taunting "Warriors, come out to playyyee". Of course this individual went on to play Luther in the first 48 hours movie as the wimpy criminal holding out on the cash from Gantz and Reggie Hammond. Hmmm, sounds like this individual would fit right in with the criminal element in charge of the world's financial system.

Thu, 03/08/2012 - 15:44 | 2236961 rlouis
rlouis's picture

At the end of the alley is a brick wall, do not go there, my son.

Thu, 03/08/2012 - 14:52 | 2236781 SHEEPFUKKER

Greeks saved from default or default and they will be saved? The whole world is upside down and bassackwards.  And so it is. 

Thu, 03/08/2012 - 14:56 | 2236799 JPM Hater001
JPM Hater001's picture

Remember that episode of South Park where the Devil was going to fight Jesus and everybody piled bets on the Devil and then he threw the fight and cashed in.

That's what Greece should have done.

Thu, 03/08/2012 - 15:34 | 2236920 Manthong
Manthong's picture

Here is clarity regarding the ECB/Greek Debt Charlie Foxtrot:

Thu, 03/08/2012 - 15:36 | 2236927 WonderDawg
WonderDawg's picture

Their opportunity to do so hasn't passed yet. They still need to get the bailout money, then they can give Germany and the rest the finger. But they won't.

Thu, 03/08/2012 - 14:47 | 2236760 nope-1004
nope-1004's picture

Whatever happens and whatever we are "told", will be a lie.  There will be backroom shenanigans to appear like things went smoothly.

Amazing that no one in the MSM even asks, "why is the predominant talk out of Europe about solvency issues, default issues, and 80% haircuts if all is well?"


Thu, 03/08/2012 - 15:06 | 2236829 Bay of Pigs
Bay of Pigs's picture

"The ECB is well capitalized".

The Bernank

Thu, 03/08/2012 - 15:03 | 2236818 AbelCatalyst
AbelCatalyst's picture

That's one way to do a full write down - new bonds devalue by 80% each round...  Give it three rounds and Greece is almost debt free!!  Can the US do that too?  I wonder what China would think about that?


Thu, 03/08/2012 - 15:21 | 2236881 Silver Bug
Silver Bug's picture

For the sake of your future Greece, just default now! It is inevitable anyway!

Thu, 03/08/2012 - 16:47 | 2237156 bobola
bobola's picture

Let's say private money now stays away from most sovereign bonds.

Central bank balance sheet debt should start ramping up even faster, right..??

I don't see the advantage of driving away private money, unless the goal is to route it to securities..


Thu, 03/08/2012 - 14:40 | 2236721 bobola
bobola's picture

So, the ECB will be the only buyer..??

Bernanke is smiling.......

Thu, 03/08/2012 - 14:42 | 2236733 CPL
CPL's picture

No, the US will pay as well, Sterilized QE remember?


Thu, 03/08/2012 - 14:43 | 2236741 mayhem_korner
mayhem_korner's picture



There is really only one Central Bank, with East and West branches.

Thu, 03/08/2012 - 14:52 | 2236780 Silver Dreamer
Silver Dreamer's picture

The goal is one bank to rule them all of course.

Thu, 03/08/2012 - 15:03 | 2236823 Silver Pullet
Silver Pullet's picture

Yup. Very close now.


Some researchers are pointing out that Iran is one of only three countries left in the world whose central bank is not under Rothschild control.

Before 9-11 there were reportedly seven: Afghanistan, Iraq, Sudan, Libya, Cuba, North Korea and Iran.

By 2003, however, Afghanistan and Iraq were swallowed up by the Rothschild octopus, and by 2011 Sudan and Libya were also gone. In Libya, a Rothschild bank was established in Benghazi while the country was still at war


Thu, 03/08/2012 - 15:16 | 2236873 Dickweed Wang
Dickweed Wang's picture

Funny how that information gets left out of the conversation when the MSM tells everyone we are supposedly fighting for the sake of the  "people" in those countries.

Thu, 03/08/2012 - 18:19 | 2237488 JohnnyBriefcase
JohnnyBriefcase's picture

Fucking infuriating is what it is.

Thu, 03/08/2012 - 15:18 | 2236874 Dickweed Wang
Dickweed Wang's picture


Thu, 03/08/2012 - 15:32 | 2236913 Vince Clortho
Vince Clortho's picture

Yup. The Russia/China vs U.S. thing is a non-issue for the CB leadership.  Great theatre for the debt slaves to think they are giving their lives and money to fight for some great cause.

CNBC can give you the details.

Iran is in a very precarious spot.  The Oligarchy has plans for a branch office in Tehran.  Democracy and prosperity are on the way.  Don't worry about all that messy petroleum.

Wonder who the next "President" of Iran will be?

Thu, 03/08/2012 - 14:40 | 2236724 Sweet Chicken
Sweet Chicken's picture

The whole thing is MF'ed

Thu, 03/08/2012 - 14:40 | 2236725 Burr's 2nd Shot
Burr's 2nd Shot's picture

Finally, something that really is priced in.

Thu, 03/08/2012 - 14:41 | 2236728 Manthong
Manthong's picture

Well at least they will be liquid at <80%..  the next "bailout" is already priced in.

Thu, 03/08/2012 - 14:41 | 2236730 SHEEPFUKKER

Wow, such willing participants.  Thanks for playing in our giant global ponzi scheme.  Please pick up your consolation prizes at the door.  

Thu, 03/08/2012 - 15:45 | 2236962 Ruffcut
Ruffcut's picture

Keep your consolation prize. Everytime I get one, it is a bag of warm dog shit.

Thu, 03/08/2012 - 14:41 | 2236731 mayhem_korner
mayhem_korner's picture



I love it when a good transfer comes together.

Thu, 03/08/2012 - 14:42 | 2236734 tekhneek
tekhneek's picture

Why the fuck would anyone lend them money?

Thu, 03/08/2012 - 14:44 | 2236746 JPM Hater001
JPM Hater001's picture


Thu, 03/08/2012 - 14:50 | 2236770 nope-1004
nope-1004's picture

It's not money, it's FRN's.  Those in the 'know', know we are headed for a new currency, so lending toilet paper now to delay this pig is a no brainer.


Thu, 03/08/2012 - 14:50 | 2236773 Executioner
Executioner's picture

Spill out my coffee! +1

Btw, this 80% zh call was really right on the spot. Amazingly precise.

Thu, 03/08/2012 - 14:46 | 2236756 CrashisOptimistic
CrashisOptimistic's picture

Because they were told to.  Lend the 30 year money or lose your business license in Europe.

Folks, this sort of thing is not what takes the system down.  Visible things will be attacked with NO LIMITS.  The governments have no limits.  They will do anything.

What will take them down is the item that is slow and inexorable and has no particular deadline.  

Thu, 03/08/2012 - 15:32 | 2236908 flacon
flacon's picture

Like the exponential function applied to their "debt-money"?

Thu, 03/08/2012 - 14:53 | 2236788 SHEEPFUKKER


Thu, 03/08/2012 - 15:33 | 2236912 flacon
flacon's picture


Thu, 03/08/2012 - 17:40 | 2237361 Calmyourself
Calmyourself's picture

Hunger, energy, physical reality is a bitch..

Thu, 03/08/2012 - 15:06 | 2236828 The Reich
The Reich's picture

Cheap stupid money, directly coming out of the ECB press.

Thu, 03/08/2012 - 14:43 | 2236738 nobusiness
nobusiness's picture

Market loves it.  on to new 5 year highs.

Thu, 03/08/2012 - 14:43 | 2236739 ZippyBananaPants
ZippyBananaPants's picture

Flaming cheese.

Thu, 03/08/2012 - 14:45 | 2236750 rupeshpatel
rupeshpatel's picture

how was your analysis 'spot on'? tyler your view yesterday was that they wouldnt be able to get the 75% participation?! before this you were suggesting that there was no interest for acceptance by anyone apart from the BANKS.

you were predicting a disorderly default today, YOU WERE COMPLETELY WRONG! If you are not careful you will be completely discredited for writing biased articles with no rationality.






Thu, 03/08/2012 - 14:48 | 2236767 CrashisOptimistic
CrashisOptimistic's picture

Maybe they only got 43%.  How would we know?  You want to believe them?

Thu, 03/08/2012 - 14:54 | 2236791 mayhem_korner
mayhem_korner's picture

Maybe they only got 43%.


The headline % isn't the issue, but that's the ball they want you to watch.  The issue is who THEY "is".

Thu, 03/08/2012 - 14:51 | 2236778 mayhem_korner
mayhem_korner's picture



RP.  Even tho' it was embedded in the article, here is the reference:

Thu, 03/08/2012 - 14:53 | 2236789 LawsofPhysics
LawsofPhysics's picture

Were you at the table, hhmmm food for thought.  Some advice though, the "all caps" thing reminds me of the broker I fired last June.  Just like him, you stink of fear.

Thu, 03/08/2012 - 14:56 | 2236800 Tyler Durden
Tyler Durden's picture

If you were to actually read what we have said, it is that the fulcrum security is the UK-law bonds, which as the article notes, are purposefully delayed to give the impression they will comply with the exchange offer when the nearly €30 billion issue will have to be taken out at par due to the impossibility of imposing retroactive CAC. Furthermore, our advice has been to short Greek law bonds and go long UK-law, a strategy that has generated 20% returns YTD.

See here, here and here.

As for the Greek bonds, the CDS trigger is what has always been the issue. Of course, a sub 75% participation would be great here too to facilitate the premature end of the ponzi, but with guns to their heads, funds may well be unwilling to commit suicide.



Thu, 03/08/2012 - 15:09 | 2236843 JPM Hater001
JPM Hater001's picture

They better pull the trigger twice just to be sure.

Thu, 03/08/2012 - 15:15 | 2236869 resurger
resurger's picture

check this:

"If you are not careful you will be completely discredited for writing biased articles with no rationality."



Thu, 03/08/2012 - 15:15 | 2236870 trebuchet
trebuchet's picture

why taken out at par? just default on a per issue basis targeting the london law holdouts. thye collect on the cds in any case

Thu, 03/08/2012 - 14:46 | 2236757 youngman
youngman's picture

The ECB said they will take them again...and they will have them all by tomorrow moring I par of course.....

But on the brite side.........the Accountants are working overtime ...marking to market...and adjusting everyone Balance fast fast..

Thu, 03/08/2012 - 14:57 | 2236805 Tuffmug
Tuffmug's picture

Yeah, moment of truth! 100 Billion Mark to Market moment as big smelly turds of Greek debt exposed on balance sheets worldwide.

Thu, 03/08/2012 - 14:47 | 2236761 rupeshpatel
rupeshpatel's picture

im just a broker but even i worked out there would be high participation

come on mate ..your rupposed to be some kind of hotshot !


Thu, 03/08/2012 - 14:53 | 2236787 mayhem_korner
mayhem_korner's picture

im just a broker


How's life post-MF, mate?

Thu, 03/08/2012 - 14:59 | 2236804 LawsofPhysics
LawsofPhysics's picture

There you go, any interest in actually prosecuting the fucking fraud yet?  Hello?  Anyone?

Most people make sure that others in their profession follow some ethical standard, less your "profession" suddenly "vaporize".

fuck the paper pushers.

Thu, 03/08/2012 - 15:22 | 2236882 AgShaman
AgShaman's picture

I'm guessing that the "Brokers" in that business knew who to call and complain to:

...but they've been too busy doing 'god's work'

Thu, 03/08/2012 - 15:41 | 2236944 Winston Churchill
Winston Churchill's picture


Thu, 03/08/2012 - 15:40 | 2236945 Winston Churchill
Winston Churchill's picture


Thu, 03/08/2012 - 15:45 | 2236966 fuu
fuu's picture

Access Denied.

Thu, 03/08/2012 - 14:48 | 2236764 carbonmutant
carbonmutant's picture

Greeks are boiling some frogs...

Thu, 03/08/2012 - 14:48 | 2236765 Yen Cross
Yen Cross's picture

 Will the sweetener on these bonds have a (involuntary kidney donor ) default clause in them?

Thu, 03/08/2012 - 14:49 | 2236769 Die Weiße Rose
Die Weiße Rose's picture

03/08/2012 Deal or Default? 

Tension Rises as Greek Debt Swap Deadline Looms.    

 Investors are nervous as the clock ticks down to the deadline for Greece's debt swap deal. The country's private-sector creditors have to decide by Thursday evening if they want to take part or not, and it is unclear whether enough will sign up. If the deal collapses, Athens will not receive vital new bailout funds -- making a default likely.

By Ferry Batzoglou and David Böcking

Stadiou Street was once the grand boulevard of Athens. But for some time now, its reputation has been suffering. Numerous demonstrations have recently proceeded along the street, paralyzing traffic. Often, clashes with police have ensued. This week, too, Stadiou Street was the scene of unrest.

This time there was trouble in the office building at number 24, where the Civil Servants' Auxiliary Pension Fund (Teady) has its headquarters. Angry unionists stormed a meeting room in the building on Tuesday -- at precisely the moment when the Teady board were supposed to decide whether the fund would participate in the debt swap deal for private-sector holders of Greek sovereign bonds. The meeting on Tuesday was interrupted, then Teady made a decision on Wednesday evening: They would not participate.

Teady is not alone with its "no." On Tuesday, five other public pension funds demonstratively voted against participating in the debt haircut. Greece's pension funds hold domestic government bonds worth a total of €20.4 billion (€26.9 billion) -- about 5 percent of Greece's entire debt mountain. About two-thirds of that amount will be affected in any case by the debt haircut. For the rest, the funds have to give their consent -- and a number of them are opposing the move.

Growing Doubts

Outside of Greece, too, there are growing doubts about whether the debt swap will be a success. On Tuesday, the German DAX stock market index suffered its biggest daily loss of this year, falling by 3.4 percent, partly due to fears that the deal might collapse. Earlier, an internal document from the global banking association Institute of International Finance (IIF), which represented leading banks and investors in talks with Athens over the private-sector involvement, had become public. The document warned that a disorderly Greek default could result in costs of over €1 trillion.

On Tuesday evening, the CEO of the German state-owned development bank KfW, Ulrich Schröder, also warned that the debt swap could fail. The bank's experts, he said, had found increasing evidence that fewer creditors than expected would participate in the debt swap. That, he said, was the cause of the turbulence on the markets. "I would be happy if we were wrong," said Schröder.

According to the official plan, private-sector creditors such as banks and insurance companies should write off a total of €107 billion in Greek debt. To achieve this, they need to waive about half of the nominal value of their bonds, and swap the rest for new securities with longer maturities and lower interest rates.

The Greek government is aiming for a voluntary debt swap. Greece needs at least 90 percent of its private-sector creditors to agree to the swap by the deadline of 9 p.m. CET on Thursday for the deal to succeed.

EU Monetary Affairs Commissioner Olli Rehn expressed his optimism that the deal would go through. "According to our information, the debt swap should take place without a hitch since the operation is interesting financially for the private sector," Rehn said in an interview with France's Le Figaro newspaper.

'We Are Taking Part'

Indeed, many financial institutions have announced in recent days that they would participate in the debt swap. Following announcements by several major German banks, giant insurance companies Munich Re and Allianz also promised they would participate. "We are taking part," said a spokeswoman for Munich Re. The president of the German Savings Banks Association (DSGV), Heinrich Haasis, signaled broad support for the deal on the part of the association's members. "We are assuming that virtually all of them will participate," he said.

Six Greek insurance funds have already agreed to take part, including IKA, the insurance fund for private-sector employees. In addition, during a meeting with Finance Minister Evangelos Venizelos on Tuesday evening, six major Greek banks agreed to take part in the deal with all their Greek government bonds.

The problem is the following. Politicians were able to put pressure on major banks and insurers to participate in the debt haircut. In any case, many financial institutions had already largely written off the Greek bonds on their balance sheets, meaning they are not particularly affected by the debt swap.

But with other creditors, the participation is much more problematic. The Greek pension funds are a case in point. They now face a crucial test. They suddenly find themselves exposed to drastic losses totaling around €11 billion. Although there are vague plans for the funds to receive state-owned real estate assets in return, nobody currently knows what this will mean in concrete terms, or whether these properties are actually usable.

The pension funds are already suffering from dramatic drops in income as a result of wage cuts of up to 50 percent within the space of two years, skyrocketing unemployment and lower capital injections from the state budget. As a consequence, pensions have been reduced significantly. "We want to prevent a new crime at the expense of the insured," said union leader Costas Tsikrikas on Tuesday, justifying demonstrators' tough approach. University professor Theodore Paraskevopoulos spoke of a scandal. "The debt haircut is relieving the state of its obligation to pay pensions," he said.

As corporations under public law, the pension funds were forced to make a risky investment. They were obliged to carry out the informal instructions of the incumbent governments, namely that reserves could only be invested in Greek bonds. Now the funds fear the wrath of their members. And they are not alone in that fear. According to KfW CEO Schröder, many fund managers and asset managers outside Greece have also decided not to participate in the debt swap, out of concerns they could be sued by their clients.

Ruined by the State

There is also massive resistance among average wage earners in Greece who invested their savings in government bonds, which were seen as safe. The majority of them are expected to decline the debt swap offer. Private individuals hold about €3.2 billion in Greek government bonds. "This affects more than 11,000 people and their families," says Yiannis Tsolias of the association of private investors in Greek bonds. "Some people invested all their savings, which they earned above board. The government is ruining them."

The IIF said on Wednesday that just 40 percent of private-sector investors have signed up for the deal so far. If not enough investors sign up by the deadline on Thursday evening, then Greece will have to resort to Plan B. The voluntary debt swap would then be abandoned. Instead, creditors would be forced to participate through the retroactive introduction of so-called collective action clauses (CACs).

This solution would be far more problematic. The rating agencies have warned that if the CACs are triggered, then they will declare Athens to be in default. That would reduce Greek bonds to irrevocable junk status, making it even more unlikely that the country will be able to return to raising money on the markets any time in the foreseeable future. Last week, two of the big three ratings agencies, Moody's and Standard & Poor's, already declared Greece to be in selective default.

And it is by no means certain that even a compulsory debt swap would succeed. Although the Greek parliament has created a legal basis for the retroactive introduction of CACs, there are hurdles to those clauses being triggered. At least 50 percent of investors have to participate in a vote over a compulsory swap and two-thirds have to agree to it. It is completely unclear whether this condition could be fulfilled.

Legal Disputes.

Even the two-thirds rule could be contested. Around €29 billion out of the around €206 billion worth of debt held by private-sector investors is not governed by Greek law, but by, for example, English or Japanese law. A 75 percent approval threshold applies on these bonds, making it easier for owners of these securities to put together blocking minorities. A number of hedge funds have supposedly been trying to do this for months, which would allow them to reject a debt swap. The result might be legal disputes that could go on for years.

If Athens' Plan B should also fail, then the country could be faced with a disorderly bankruptcy -- exactly the thing that the European Union and International Monetary Fund have been trying to prevent for the last two years. The EU and IMF have made a successful private-sector debt swap a condition of releasing the second bailout for Greece, which was agreed upon at a Euro Group meeting in February and is worth €130 billion. If the haircut does not happen, then Greece would default on March 20, when €14.5 billion in loans mature.

It's safe to say that the tension will not abate as the clock ticks down to the Thursday evening deadline. The Greek government will announce the results at 7 a.m. CET on Friday.


posted by wr;)

Thu, 03/08/2012 - 15:03 | 2236817 Gomie
Gomie's picture

Since that was written we have learned from FT and other sources that the participation rate is nearly 80%. News changes fast, you have to keep on top of it.

Thu, 03/08/2012 - 15:12 | 2236858 Everybodys All ...
Everybodys All American's picture

I have this arm twisting image with their face being pushed against a brick wall and their arms behind their backs. Sounds like a deal with the EU devils is getting done.

Thu, 03/08/2012 - 14:51 | 2236775 CrashisOptimistic
CrashisOptimistic's picture

BTW, until documents are signed and money changes hands, all of this "agreement" is just discussion.

Thu, 03/08/2012 - 14:51 | 2236776 Seasmoke
Seasmoke's picture

this is the longest game of musical chairs in history......someone check and see if the record is just skipping

Thu, 03/08/2012 - 15:05 | 2236824 resurger
resurger's picture

The CB DJ's keep spinning the music, investors wil get tired soon.. i think they are already tired

Thu, 03/08/2012 - 14:52 | 2236779 kito
kito's picture

how much ocean water needs to be removed from a sinking boat thats been irreparably breached?

Thu, 03/08/2012 - 15:03 | 2236821 resurger
resurger's picture

you own man!


Thu, 03/08/2012 - 16:34 | 2237108 Non Passaran
Non Passaran's picture

A boatload?

They can DO it!

Thu, 03/08/2012 - 17:54 | 2237416 kito
kito's picture

a boatload only if the breach could be plugged.......i said "irreparably"..........................

Thu, 03/08/2012 - 17:47 | 2237388 Calmyourself
Calmyourself's picture

Problem is Kito they think their pumps are fast enough to just keep sailing on why would any brain dead passengers notice bilge water anyway?

Thu, 03/08/2012 - 14:52 | 2236782 reTARD
reTARD's picture

"Fresh Start" sounds good, I think I'll buy some, LOL. Not sure if even Apple's marketing genius could help the Greeks... but then again if you slap an Apple logo on something some fool will buy it.

Thu, 03/08/2012 - 15:20 | 2236878 Zero Govt
Zero Govt's picture

millions of fools about having a cool smooth experience

beats the billions of twats pulling their hair out on Microshite

customer satisfaction: you might like to try it sometime

Fri, 03/09/2012 - 06:38 | 2238993 StychoKiller
StychoKiller's picture

Thoroughly happy with my Linux PC:

Thu, 03/08/2012 - 14:52 | 2236783 sodbuster
sodbuster's picture

I think you are wrong- it won't take a couple of years.

Thu, 03/08/2012 - 15:02 | 2236786 DavidC
DavidC's picture

Well, there's one thing anyway...Apple's been on a tear again today (+ 2%).

I was on MSN earlier, looking at the results of a 'Will I buy an iPad3?' (N.B. not scientifically valid results though) -
26 % Love it - can't wait to get mine
37 % Not a big enough improvement - will stick with iPad 2
16 % Not impressed - I'd rather have a non-Apple tablet
21 % Not interested - tablets are a waste of money

Not exactly a ringing endoresement and certainly not worth a 2% move up.


Thu, 03/08/2012 - 15:11 | 2236850 Dr. Engali
Dr. Engali's picture

But the sun came up today...therefore apple must rise.

Thu, 03/08/2012 - 14:53 | 2236790 carbonmutant
carbonmutant's picture

The only reason the bondholders are accepting this BS is because the CDSs are a worthless scam.

Thu, 03/08/2012 - 15:10 | 2236846 Joeprimo55
Joeprimo55's picture

Exactly, who in there right minds would think there could ever actually be a default again in this world?  Well one that would actually trigger a payout.  This is all a big scam to kick the can and keep a bank propped up on computer generated numbers.  Fhukin joke of a world we live in today.  If I had enough money, I too would definitely buy in to this ponzi scam!  But then again it's us, the citizens of the world that pay taxes and gets bent over to pay for this BS in the end.  Well some of us...

Thu, 03/08/2012 - 14:56 | 2236797 surf0766
surf0766's picture

Depressions is already setting in for the Greek people. They will never see any positive effects of any bailout.

Thu, 03/08/2012 - 15:06 | 2236819 Zero Govt
Zero Govt's picture


pumping over €200bn into Greece in 2 years and the economy is still nose-diving at a rate of minus -4% per annum

Paul Krugman needs to recalibrate his Stimulis Theory and get his arse down to Greece for some research

Thu, 03/08/2012 - 15:00 | 2236813 Zero Govt
Zero Govt's picture

Greek "Fresh Start" Bonds Face Immediate 80% Loss, 98% Probability Of Redefault

Lookin Good

Can the news get any better from Europe?

...every patch falls off in a matter of minutes

Thu, 03/08/2012 - 15:09 | 2236839 Dr. Engali
Dr. Engali's picture

Not a lot of room to short.

Thu, 03/08/2012 - 15:04 | 2236822 semperfi
semperfi's picture


Thu, 03/08/2012 - 15:11 | 2236857 Zero Govt
Zero Govt's picture

Yes the Greek stock market is up 40% while the economy is tanking -4% 

when the Greek economy halves in a year you'll probably double your money going long stocks!

Thu, 03/08/2012 - 15:12 | 2236849 JPM Hater001
JPM Hater001's picture

2:09 - I AM JUST GIDDY~!!!

Thu, 03/08/2012 - 15:11 | 2236851 johnjkiii
johnjkiii's picture

Greece has defaulted every 14 years since getting independence from Turkey in the late 19th Century. The only way to own Greek debt is to wait for a default then buy a 10 year and you might, maybe, if you're lucky, get your money back. But you have to make sure you buy the bonds in a currency that doesn't have a built-in devaluation rate. That leaves the $$ out since Bennie will institute a 2% guaranteed annual devaluation policy soon and since the current "price stability" mandate has produced a 3.4% devaluation rate for the past 100 years, this probably means we will see inflation at more than 5% on average until sanity is reinstated or pigs fly.

Thu, 03/08/2012 - 15:22 | 2236883 Al Huxley
Al Huxley's picture

Or you could just ask yourself 'why the fuck would I lend these guys money, when they're always defaulting on their debt?' and never buy any of their bonds.

Thu, 03/08/2012 - 15:11 | 2236855 youngman
youngman's picture

ONE MORE HOUR..........Oh boy...I am so much money am I going to lose again....thats good investing right...????

Thu, 03/08/2012 - 16:33 | 2237103 Non Passaran
Non Passaran's picture

Total scam and disgrace...

I just sold my TZA at a minimum profit.  At least this time around I didn't lose (although I should have sold it two days ago).

Thu, 03/08/2012 - 15:13 | 2236860 youngman
youngman's picture

The Greek Ministry of Finance pension fund  just said they will NOT´t make this stuff up....really


Thu, 03/08/2012 - 15:13 | 2236863 Bastiat
Bastiat's picture

"Fresh Start" bonds?  More like "Pull my finger" bonds.

Thu, 03/08/2012 - 15:16 | 2236872 adr
adr's picture

One guy owes $100 to another, and there is a third guy holding $100 who owes $100 to the first. The second guy owes $100 to the third.

The third guy gives his $100 to the first guy who gives it to the second, and the second guy gives the $100 back to the third. Even though $300 was actually owed everyone still thinks they were paid until the third guy figures out he got back the same $100 bill.

Exactly the story with Greece. Nothing but a money laundering ponzi scheme. Bank A lends to Bank C so Bank C can pay back Bank B that owes money to Bank A.

Thu, 03/08/2012 - 15:26 | 2236886 LouisDega
LouisDega's picture

Sounds confusing. Let me clarify this with my accountants Jack Daniels and Paul Masson

Thu, 03/08/2012 - 15:58 | 2237001 Dapper Dan
Dapper Dan's picture


How Western Money Works


Perhaps an old one, but I understand it works more or less like this:

A German walks into an Irish Inn and inquires about a room.

The inn keeper tells him they have several different rooms available.

The German says he would like to see them. So the Inn keeper gives him a handful of keys and the German puts down a 100 euro note on the bar for security and walks away to begin his inspections.

The Innkeeper takes the note and runs down the street to the brewer and gives it to him to pay the brewery tab he's been behind on.

The Brewer takes the note and goes next door to the butcher who he owed money to for some time and pays him off.

The butcher takes the note and drives out to the farmer who sold him his livestock to butcher and pays him off.

The farmer runs back into town to the feedstore and pays his bill that he was owing for some time.

The feedstore owner slips out to the alley and finds the lady of the evening that's been running a tab on him.

The lady takes her note and walks to the Inn and pays her bill for several rooms she's been borrowing now and then and promised to pay soon.

The 100 euro note is barely on the bar a few seconds when the German walks back in and says he's really not interested in any of the rooms, picks up his note and walks out of the Inn.

  • All debts have been paid
  • Optimism returns
  • We thank the Germans.
Thu, 03/08/2012 - 17:32 | 2237317 Gadocat99
Gadocat99's picture

Of course the person who loses in this scenario is the last borrower of debt. It is the people around the borrower who prosper.

Thu, 03/08/2012 - 17:10 | 2237245 Angus195
Angus195's picture

Now, if one were to add to this analysis the concept of INTEREST OWED on the debt things really get fun.  Amazing that while these banks all 'create' and 'manufacture' the principal debt ... no one asks the question where was or is the money to pay the interest owed????  HMMMM........  I guess it depends on what your definition of 'is' is...

Thu, 03/08/2012 - 15:17 | 2236875 Yardfarmer
Yardfarmer's picture

sounds like the greatest single clusterfuck since the tower of Babel and we're still on the ground floor!

Thu, 03/08/2012 - 15:23 | 2236884 brooklynlou
brooklynlou's picture

Every time I see the words "Fresh Start Bonds" I can't help but picture a brand of feminine hygeine products. 

Young actress holding up a douche dispenser asking the audience if they "Fresh Started" today

Thu, 03/08/2012 - 15:25 | 2236888 surf0766
surf0766's picture

Tears... just freakn in tears... thanks

Thu, 03/08/2012 - 17:50 | 2237404 Calmyourself
Calmyourself's picture

In this case Virgin olive oil flavor, right?  Rim shot...

Thu, 03/08/2012 - 17:01 | 2237216 Bastiat
Bastiat's picture

"Jump Start" would a better PR name than Quantitative Easing -- would also make a great name for generic Viagra!

Thu, 03/08/2012 - 15:34 | 2236917 non_anon
non_anon's picture

can kicking by a gimp

Thu, 03/08/2012 - 15:39 | 2236939 Possible Impact
Possible Impact's picture

Banker buster bonds - weapons of mass financial destruction

Thu, 03/08/2012 - 17:29 | 2237312 Angus195
Angus195's picture



"Greece isn't about saving Greece."

“It’s about the subversion of sovereignty and democratic processes by removing decisions from people and giving them to trans-national financial elites. It’s about preserving a global system that’s based on the accumulation of debt and growing government power because there are two groups of people who benefit tremendously from that system, even if most people don’t.”

~Dan Denning

Thu, 03/08/2012 - 17:29 | 2237314 ebworthen
ebworthen's picture

Greece has already defaulted; PSI = Postmortem Silicone Injection

Fri, 03/09/2012 - 00:23 | 2238484 chindit13
chindit13's picture

Accounting authorities might as well just call all this what it is:  amortization of Greek goodwill.  Greece has been taken over by the EU, who has overpaid for the privilege, thus the need to amortize.  As each swapped bond falls to 20% of par, Greece debt asymptotically approaches zero, the goodwill gone.

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