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IIF Steering Committee Holds Only 20% Of Greek Bonds Subject To PSI

Tyler Durden's picture




 

Earlier this morning, to much fanfare, the various member of the IIF steering committee announced that they would all gladly be part of the voluntary haircut that would chop off over 70% of their hair. The FT described this development as follows: "A large grouping of private creditors agreed on Monday to take part in the multibillion-euro Greek debt swap in a significant step forward for Athens as the country struggles to avert a sovereign default. Twelve banks, insurers, asset managers and hedge funds in the steering committee of bank lobby group the Institute of International Finance said in a statement that they would take part in the bond exchange. Members of the IIF steering committee include BNP Paribas, Deutsche Bank, National Bank of Greece, Allianz and Greylock Capital Management. A spokesman for the IIF said this represented a “substantial” amount of the €206bn in Greek bonds held by the private sector that banks managing the swap are trying to involve. Analysts estimate that institutions represented by the IIF make up about 50 per cent of the private sector bonds." Bzzz. Analysts, as so often happens, may have been wrong to quite wrong.  According to just released data from Bloomberg analysts analysts may have overestimated the substantial amount... by about 150%. From Bloomberg: "Private Investors Holding About 20% of Greek Debt to Join Swap...The 12 members of the creditors’ steering committee that said today they would join in the exchange have debt with a face value of about 40b euros ($53b), compared with the 206b euros of Greek bonds in private hands, according to data compiled by Bloomberg from company reports." If so, this means that a whopping 80% of the bonds subject to exchange are unaccounted for, and more importantly, it means that the likelihood of a major blocking stake having organized is far greater than even we expected.

As we said earlier today, everyone is now scrambling to get some color on how many funds are currently part of the Bingham group of ad hoc hold out creditors and how many bonds they represent. If the above is even remotely indicative of holding patterns 3 days ahead of the deadline, the PSI ain't gonna happen.

 

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Mon, 03/05/2012 - 16:38 | 2225391 idea_hamster
idea_hamster's picture

[deleted dumb mistake -- move along.]

Mon, 03/05/2012 - 17:15 | 2225619 Poor Grogman
Poor Grogman's picture

But we love dumb mistakes at ZH!
Don't be a spoil sport.

Mon, 03/05/2012 - 16:38 | 2225395 resurger
resurger's picture

"the PSI ain't gonna happen."

Amen.

Mon, 03/05/2012 - 17:23 | 2225646 lineskis
lineskis's picture

Can't wait to see what will happen to the CDS market... '.'

No PSI would imply a restructuration of the Greek Debt which a priori should trigger the CDS, right?

Unless the ISDA says otherwise, in that case all CDS out there will be understood as worthless...

Mon, 03/05/2012 - 17:47 | 2225791 dannyboy
dannyboy's picture

The ISDA won't let that happen. They will have to trigger the CDS after the PSI fail on March 9. IF the ISDA says post PSI fail that it isn't a credit event and CAC's activated then it wouldn't just be the CDS market that would go to hell in a handbasket. It would be the entire Sov Debt periphery of europe as the ISDA would eliminate any way of hedging against Sov's. The ISDA knows this and they know that we know as it is just another mouthpiece for the circle of banks.

It would collapse the entire CDS market, literally overnight. But it would also collapse the Sov's really quickly aswell as nobody would buy sov debt, which would mean the ECB would have to expand it's balance sheet even faster than it is now until those countries defaulted.

They won't let that happen, not yet anyway. But who knows, to paraphrase Celente: who knows what schemes undreamed will take place. Although it would require money printing from here to the moon and back to cover the failure of periphery sov's.

Mon, 03/05/2012 - 18:59 | 2226030 Plymster
Plymster's picture

I've seen it pontificated that a large quantity of CDS's are just there for the banks to have on their books, with no actual usage planned.  Sort of a way of buying insurance without ever intending to collect on it should something happen (which is a form of insurance fraud).

Assuming that is correct, then not triggering a default would have no effect on the CDS market, because the banks are just using it as an accounting gimmick.  This would kill anyone who might legitimately use CDS to hedge their position, but still have little effect on the CDS market as a whole, and only effect the Soveriegn Debt markets in that only banks would continue to buy sovereign bonds (ie: central banks would continue to print to absorb gov't debt).  This would force cash into other areas (commodities, corporate bonds, commercial paper, equities, etc), which is exactly what the CBs all want. 

Mon, 03/05/2012 - 22:25 | 2226641 mendigo
mendigo's picture

Very iiinteresting....but stupid!
Tchir makes the point that the isda cannot trigger the CDS becauase the haircut is voluntary. There was not point in wasting further time on his opinion - to argue that it is voluntary you would have to argue that it benefits them to take the haircut as opposed to the other options. Amazing how a person can be so intelligent and so rational and yet so wrong I thing what's lacking is any understanding of right and wrong.

Mon, 03/05/2012 - 23:24 | 2226786 Buck Johnson
Buck Johnson's picture

And this should scare everybody on the planet, not the idea of Greece defaulting and a credit event by the ISDA being issued or not.  The fact that they are trying so hard to not issue a credit event, what monster lies under the waves of finance that have been swimming around.  It's the unknown  of how many naked CDS's are out there for just Greece and how many where made up until December of 2011 where the EU parliament but a ban on naked CDS's of Sov debt.  But how many where made prior to this ban and if this ban is concrete without loopholes.   There is maybe 37 Trillion dollars in CDS's (more than bonds) in the market, and that amount I gave you was a rough one, it was 67 Trillion 2 years ago so I don't think they truly know.  Now I can bet that Greece may have over a Trillion or more in naked CDS's waiting for a credit event and that is what they are afraid of.  Because they go to auction they still will need to come up with at least 1 Trillion if not more to cover the CDS's when an event is declared. 

And this doesn't even mention derivatives that may be tied into all  of this and this market is possibly at 250 Trillion.  So you see they issuers of CDS's and in derivatives have been taking quarterly payments for years saying these things are legit and then one day ISDA might say on Friday morning that it's not considered a credit event, it would take down the world markets.  So they are in a pickle, the destruction of the EU or the desctruction of the banking system quickly, which would they like to have.

Mon, 03/05/2012 - 19:40 | 2226147 mendigo
mendigo's picture

I hope you are correct but somehow I doubt it. Look at the trend, they always seem to manage. Basically if they are at risk of failing they change the rules. The Greeks are going to get this thing shoved up thier buttlike the Irish. How can the CDS not trigger it is utter corruption.

Tue, 03/06/2012 - 00:38 | 2226950 JPM Hater001
JPM Hater001's picture

How can the CDS not trigger it is utter corruption.

Your new aren't you?

Mon, 03/05/2012 - 16:41 | 2225408 The 100 Trillio...
The 100 Trillion Dollar Man's picture

I'm guessing they've coordinated a drip-drip release. We'll see another dozen large institutions declare tomorrow, and again on Wednesday.

Mon, 03/05/2012 - 19:48 | 2226168 mendigo
mendigo's picture

Could they just fabricate debt to be haircut¿
Or would that be wrong...

Tue, 03/06/2012 - 04:09 | 2227247 jeff montanye
jeff montanye's picture

that makes some sense.  get a feeling of momentum going.  

Mon, 03/05/2012 - 16:54 | 2225435 Arvo Particleboard
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To flowbee, or not to flowbee: that is the question.

 

http://www.flowbee.com/

Mon, 03/05/2012 - 18:41 | 2225976 PersonalRespons...
PersonalResponsibility's picture

flowbee.

Mon, 03/05/2012 - 16:45 | 2225442 lolmao500
lolmao500's picture

So kabooooooooom goes Greece then? FINALLLLLLLYYYYYYYYYYYYYYYYYYY!

Mon, 03/05/2012 - 16:47 | 2225452 brooklynlou
brooklynlou's picture

Greece does not go "Kaboom"

Greece goes "OPA!!!"

Tue, 03/06/2012 - 00:39 | 2226955 JPM Hater001
JPM Hater001's picture

Opa-boom.

Mon, 03/05/2012 - 16:49 | 2225459 Marge N. Callz
Marge N. Callz's picture

Of all the possible outcomes of the PSI, only 1 is positive and that entails getting over 90% participation which doesn't look very likely.  The others involve the use of CAC's, triggering CDS's, and or a hard default.  All of those spell game over for the Euro zone because the vultures will come out and pounce on the rest of the PIIGS.  But the next time they will make sure they have enough of a blocking stake to put the kabosh to any type of restructuring.

Mon, 03/05/2012 - 16:51 | 2225465 slewie the pi-rat
slewie the pi-rat's picture

the cBs know where everything is, i'll betcha!

this was just a bum steer...

Mon, 03/05/2012 - 16:52 | 2225469 CrashisOptimistic
CrashisOptimistic's picture

The EU will cut a check for 14 billion Euros on March 20 to make the Greek interest/redemption payment, regardless of anything else whatsoever.  

They are terrified of the swaps.  They always have been.  

Greece could do nothing at all and the EU would pay their bond interest/redemptions.  

Greece should play a much harder game with the EU.  Ireland, Portugal, Italy and Spain damn sure will.

 

 

Tue, 03/06/2012 - 00:40 | 2226958 JPM Hater001
JPM Hater001's picture

Extend.................................... and pretend.

Mon, 03/05/2012 - 16:53 | 2225480 greensnacks
greensnacks's picture

Swap is for those not holding CDS. Bullish future CDS market.

Mon, 03/05/2012 - 16:56 | 2225515 4realmoney
4realmoney's picture

Tom Woods discusses what ant-Ron Paulers could possibly be thinking. Very interesting.

http://djia.tv/ron-paul/inside-the-minds-sic-of-anti-ron-paul-voters/

Mon, 03/05/2012 - 16:58 | 2225522 groundedkiwi
groundedkiwi's picture

Can anyone here decode this link for me, and should I be making a submission? I am basically financially illiterate on share markets etc, but , on a fast learning curve. Many thanks in advance for any comments.

http://www.nzherald.co.nz/personal-investment/news/article.cfm?c_id=71&objectid=10772166

Mon, 03/05/2012 - 18:59 | 2226032 dannyboy
dannyboy's picture

Fellow kiwi!

2 things, one is this is the next level of subordination of depositors in NZ / AUS banks.

The other is, the chance of the NZRB taking any notice of what you say if they even read it, is about the same chance as the world flipping upside down.

With the trio of morons they have running it, and the chief idiot in charge I wouldn't bet on anything but what they have planned going through.

Epic lulz will be ANZ's response to this.

Mon, 03/05/2012 - 19:26 | 2226107 groundedkiwi
groundedkiwi's picture

lulz?

Mon, 03/05/2012 - 19:33 | 2226122 dannyboy
dannyboy's picture

ANZ will be first to use it. So thier response will be funny.

But if you are wondering how this will turn out here are some descriptions: Failure, epic failure, down in flames, or any synonym to that effect. Reminder this is what happened when CBA tried to do this.

http://www.theaustralian.com.au/business/financial-services/cba-pays-price-as-move-on-covered-bonds-backfires/story-fn91wd6x-1226258822155

Mon, 03/05/2012 - 17:00 | 2225534 Joebloinvestor
Joebloinvestor's picture

I wouldn't believe JACK SHIT out of these LIARS.

They spin, imply and decieve.

They try to threaten the holdouts with worse consequences.

The hilarious irony is the "contagion" they are so fucking afraid of is caused by them.

"I'll show me!"

Mon, 03/05/2012 - 17:04 | 2225557 williambanzai7
williambanzai7's picture

MAJOR SWAP

Mon, 03/05/2012 - 17:15 | 2225566 Vincent Vega
Vincent Vega's picture

" a whopping 80% of the bonds subject to exchange are unaccounted for" first place I would look would be the Fed's balance sheet... followed by the ECB's. Who else takes toxic debt?

Tue, 03/06/2012 - 00:24 | 2226921 StychoKiller
StychoKiller's picture

The ESF, shadow organization of the Fed/Treasury...

Mon, 03/05/2012 - 17:14 | 2225609 monopoly
monopoly's picture

This is ridiculous. I am calling Timmaayy, we will get this taken care of. Freedom to do what you want with investors funds, that is absurd. This is America!

Mon, 03/05/2012 - 17:17 | 2225629 lolmao500
lolmao500's picture

Freedom to do what you want with investors funds, that is absurd. This is America!

I think you are mistaken. This is MF Global... not America.

Mon, 03/05/2012 - 17:28 | 2225665 Gotterdammerung
Gotterdammerung's picture

They were'nt trying to be misleading where they?

Mon, 03/05/2012 - 17:35 | 2225709 non_anon
non_anon's picture

any System Shock 2 PSI users?

http://www.youtube.com/watch?v=b8NpH5ONoC4

Mon, 03/05/2012 - 17:37 | 2225724 sunnydays
sunnydays's picture

Let the default finally happen!  It is time.

Mon, 03/05/2012 - 19:21 | 2226086 Dr.Engineer
Dr.Engineer's picture
Normal 0 false false false EN-US X-NONE X-NONE Normal 0 false false false EN-US X-NONE X-NONE

Why do we think that the companies that are supposed to pay out on the CDS actually will?  If an organization has bet the farm on CDS paying out, a credit event is triggered, they go to GS, and GS tells them to FU -- what are they going to do?  They are going to go bankrupt before this would make it to through the courts.  If they don't go bankrupt, GS will offer them a percentage or nothing -- starve slowly or starve faster.

In the end, GS will survive.

Actually, I'll bet they would let the CDS holder declare bankruptcy and then buy them out for pennies on the dollar.  This would be the most Machiavellian thing to happen so it is the most likely.

 

Mon, 03/05/2012 - 19:22 | 2226092 Stuck on Zero
Stuck on Zero's picture

Buy Greek bonds.  Oil discovered in Greek waters. 

Tulane University oil expert David Hynes told an audience in Athens recently that Greece could potentially solve its entire public debt crisis through development of its new-found gas and oil. He conservatively estimates that exploitation of the reserves already discovered could bring the country more than €302 billion over 25 years. The Greek government instead has just been forced to agree to huge government layoffs, wage cuts and pension cuts to get access to a second EU and IMF loan that will only drive the country deeper into an economic decline.

http://www.321energy.com/editorials/engdahl/engdahl030612.html

 

 

Mon, 03/05/2012 - 20:06 | 2226190 itstippy
itstippy's picture

I'm not a bigshot banker that gets Million-Dollar-Bonuses.  But if I were, I'd publicly state that my bank will participate in the 70%+ haircut on its Greek bonds, in the name of Eurozone Stabeelitee. 

Then I'd quietly unload those toxic suckers by rehypothicating them to the ECB for nice fresh LTRO Euros at par, or selling them to an "evil" hedge fund at 20% haircut.  No way would I actually TAKE a 70%+ haircut on that Greek shit I was holding.

By the time the trip to the barber shop actually arrived, I'd have $2.36 worth of Greek Bonds left to get shorn and a groupon for $4 off my next haircut. 

Mon, 03/05/2012 - 21:43 | 2226512 Reese Bobby
Reese Bobby's picture

The Bingham group has one structural problem: Bingham.

Mon, 03/05/2012 - 21:51 | 2226535 jmcadg
jmcadg's picture

If oil were to be found in Greek territory, Default Now. don't let The Vampire Squid have your resources.

They'd have the best commodity to trade their way out (now they've had their gold pinched).

Tue, 03/06/2012 - 02:08 | 2227129 cnhedge
cnhedge's picture

only 20%, the deadline is thursday!

 

http://www.jinrongbaike.com/

http://www.cnhedge.com/

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