Greeks Restart Bond Haircut Negotiations, Demand Lower NPV, Bypass IIF In Creditor Discussion

Tyler Durden's picture

And so the one thing that was supposed to be set (if only briefly) in stone, the terms of the Greek creditor haircut, has now fallen apart. From Reuters: "The Greeks are demanding that the new bonds' Net Present Value, -- a measure of the current worth of their future cash flows -- be cut to 25 percent, a second person said, a far harsher measure than a number in the high 40s the banks have in mind. Banks represented by the IIF agreed to write off the notional value of their Greek bondholdings by 50 percent last month, in a deal to reduce Greece's debt ratio to 120 percent of its Gross Domestic Product by 2020." And confirming that the IIF has now lost control of the situation, "the country has now started talking to its creditor banks directly, the sources said." And because the NPV is only one component in determining what the final haircut really is, this means that the haircut just got higher or the actual coupon due to creditors will be slashed, a move which will see Sarkozy balking at this overture in which Greece once again sense weakness out of Europe. We can't wait to hear what France says to this latest escalation by Greece, which once again has destroyed the precarious European balance.

More from Reuters:

Banks represented by the IIF agreed to write off the notional value of their Greek bondholdings by 50 percent last month, in a deal to reduce Greece's debt ratio to 120 percent of its Gross Domestic Product by 2020.


There are 206 billion euros of Greek government bonds in private sector hands -- banks, institutional investors and hedge funds -- and a 50 percent reduction would reduce Greece's debt burden by some 100 billion euros.


But key details determining the cost for bondholders, such as the coupon and the discount rate, are still open.


"The battle lines are being drawn," the second person said.

And since there will be debates about this being voluntary, it appears that Greece now has considered a squeeze out option which "forces" everyone to agree to the same terms.

It is increasingly likely that Greece will force bondholders who do not voluntarily take part in the bond swap to accept the same terms and conditions, something that is possible because most of the bonds are written under Greek law.


"Ask yourself the question. After launching this, after having told the private sector involvement is essential, are (the governments) going to be prepared to lend money (to Greece) to pay hold-outs?," the first source said.


European Union leaders from the outset had stressed the voluntary nature of the deal, in order to prevent a disorderly default of the country, which they feared could have a calamitous impact on financial markets.


Athens could squeeze out bondholders by changing the law so that any untendered bonds would have the same terms as the new ones, if a majority of debtholders -- for instance 75 percent -- voted in favour of the exchange.


The European Central Bank (ECB) and the French government, who had originally been fiercely opposed to any form of forced squeeze-out, are not so against it now, even if this could trigger a pay-out of Credit Default Swaps (CDS).


One market participant said that the take-up might well be high even if the conditions were unfavourable.


"There aren't many alternatives. If I were an investor, I'd think it was about time to take my loss. I don't see much more money coming in out of Europe, so that's where it stops," this person said, asking not to be named.


"Every time (the plan) fails, something else will need to happen. And it's going to be a harsher step every time."

And so Greece has just called Europe's, America's and of course ISDA bluff all over again.

Back to square one.

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Hard1's picture

And they also demand that whatever they do is NOT considered a credit event under ISDA

rockraider3's picture

How the hell can ISDA claim that Greece negotiating a debt restructuring with individual creditors is not a credit event.... Well, I guess we will see, since this is surely the outcome.

Ahmeexnal's picture

Rise and fall of the euro:

"The europeans will love the euro"

"You must love him [Big Brother]"

greyghost's picture

they have to....or else the multi trillion dollar ponzi collapses. always remember there are  not enough monies anywhere to pay off all the bets placed in the casino. debtors in charge

Buck Johnson's picture

It's a complete joke, seriously.  Even the 50% was a credit event even if they where saying it was voluntary.  And Greece ws trying to set this up as a 75% cut at best.  I would like to know why aren't the individual bond holders aren't going to court and saying that we say no and if you change it we will go to court and force this as a credit event and get my insurance.  Greece did essentially call everyone's bluff, if you don't take this deal we will default and let everything burn.

dbells32's picture

How about the fact that European banks are still carrying their Italian and Spanish debt at par on their balance sheets?  Once they start taking haircuts on is game over.

Ahmeexnal's picture

Fire in the hole!!

lizzy36's picture

Goodbye Yellow Brick Road......

Mike2756's picture

Political union coming soon, lol.

a noun a mouse's picture

just sprinkle a little Feta compli on it. It'll taste just fine...

The trend is your friend's picture

"margin Calls know the rules of the exchange"

youngman's picture

I am beginging to wonder..which will be done first ...the restoration of the Parthenon...or the Greek debt fiasco

GMadScientist's picture

This will end in a Greece fire.

holdbuysell's picture

This whole NPV of the debt is ridiculous, isn't it?

If I understand correctly, no actual euro of debt will be 'harmed'. All will be paid back, just under different timeframes such that the present value is lower.

Am I missing something?

Rockfish's picture



Ring ring (phone csll)

Greek People - Hello

Bankster - Yes hello, is this the greek people

GP-  Yes it is how may i help you.

Bankster - Well this is the Bankster calling about the money you owe.

GP -  O you mean the money you said was like almost free and not to worry about refiing?

Bankster - Well yes that's it.when............................

GP - Yea well FUCK YOU and Fuck her too.


skistroni's picture

After they take the haircut, we'll default and finish them off. There is still hope.

GMadScientist's picture

Hope? Yes. For Greece? Mmmm...dubious.

Rockfish's picture

With 3,000 years under their belt the Greeks will be just fine. The banksters well thats something else

tarsubil's picture

You know, Turkey used to be Greek.

gojam's picture

...........and Greece used to be Turkish.

unionbroker's picture


jcaz's picture


Greece still thinks they are calling the shots..........

Oh wait.... They are.......

Rockfish's picture

Greece still thinks they are calling the shots..........


No, They're just not going to pay you back.

thunderchief's picture

Why not completely default.  Is the remaining crap the Greeks wish not to default on being saved for a later default? 

I think the Greeks should do whatever they see fit with this un-payable debt. 

But I would never do business with them when this is done. 


Rockfish's picture

How did Iceland fair?

tarsubil's picture

Shhhh!!! Pay no attention to the Island behind the curtain.

tfazzio's picture

Would u please share the link to the reuter's article.

topcallingtroll's picture


The greeks are fast learners in hardball tactics.

The banks were told in the first round of haircuts to voluntarily take the haircut or face armegeddon. The Eurocrats thought they were so smart and sophisticated playing hardball with the banks.

Greeks can play too.

max2205's picture

So what's the yield on the one year now...500%

I'll check back

DCon's picture

How are Goldman set to profit from this?


No way it is happening without their pre-approval



Arius's picture

good point .... i suppose you got to ask their clients what kind of advice are they receiving.... someone else (you know WHO) has to provide liquidity, get the other side of the trade and take a chance to risk it all .... yeah, well ... its a funny, mad, mad World ...