"No Deal" - Greek Bondholders Do Not Think Agreement Can Be Reached Before "Crunch Date"

Tyler Durden's picture


Update: the NYT chimes in, just to make the point all too clear:

Hedge Funds May Sue Greece if It Tries to Force Loss


Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments.


The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts.


The tactic has emerged in conversations with lawyers and hedge funds as it became clear that Greece was considering passing legislation to force all private bondholders to take losses, while exempting the European Central Bank, which is the largest institutional holder of Greek bonds with 50 billion euros or so.


Legal experts suggest that the investors may have a case because if Greece changes the terms of its bonds so that investors receive less than they are owed, that could be viewed as a property rights violation — and in Europe, property rights are human rights.


According to one senior government official involved in the negotiations, Greece will present an offer to creditors this week that includes an interest rate or coupon on new bonds received in exchange for the old bonds that is less than the 4 percent private creditors have been pushing for — and they will be forced to accept it whether they like it or not.


“This is crunch time for us. The time for niceties has expired,” said the person, who was not authorized to talk publicly. “These guys will have to accept everything.”


According to one senior government official involved in the negotiations, Greece will present an offer to creditors this week that includes an interest rate or coupon on new bonds received in exchange for the old bonds that is less than the 4 percent private creditors have been pushing for — and they will be forced to accept it whether they like it or not.


“This is crunch time for us. The time for niceties has expired,” said the person, who was not authorized to talk publicly. “These guys will have to accept everything.”

Time to remind readers of our definition of nuisance value, long before anyone even considered hedge fund hold outs an issue? Thank you for confirming everything we have said so far.


Five minutes before market close yesterday, Bloomberg came out with an "exclusive" interview with Marathon CEO Bruce Richards, who may or may not be in the Greek bondholder committee any longer, in which the hedge fund CEO said that the Greek creditor group had come to an agreement and that the thorniest issue that stands between Greece and a coercive default (and major fallout for Europe) was in the bag, so to say. To which we had one rhetorical comment: "Well as long as Marathon is talking for all the possible hold outs..." As it turns out, he wasn't. As it further turns out, Mr. Richards, was just a little bit in over his head about pretty much everything else too, expect for talking up the remainder of his book of course (unsuccessfully, as we demonstrated earlier - although it does beg the question: did Marathon trade today on the rumor it itself spread, based on information that was material and thus only afforded to a privileged few creditors, especially if as it turns, the information was false - we are positive the SEC will be delighted to know the answer). Because as the supposed restructurng expert should know, once you have a disparate group of ad hoc creditors, which is precisely what we have in the Greek circus now, there is nothing even remotely close to a sure deal, especially when one needs a virtually unanimous decision for no CDS trigger event to occur (yes, ISDA, for some ungodly reason, you are still relevant in this bizarro world). Which also happens to be the fascination for all the hedge funds, whom we first and then subsequently repeatedly noted, are holding Europe hostage, to buy ever greater stakes of Greek bonds at 20 cents on the dollar. Because, finally, as the FT reports, the deal is nowhere in sight: "Several hedge fund managers that hold Greek debt have said they have not been involved in the talks and will not be agreeing with the “private sector involvement” (PSI) deal – which centres on a 50 per cent loss on bondholders’ capital and a reduction in the interest they receive... Even members of the committee concede the process is unlikely to succeed in time for the crunch date: a €14.5bn bond repayment falling due on March 20." But, wait, that's not what Bloomberg and Bruce Richards told us yesterday, setting off a 100 point DJIA rally. Time to pull up the Einhorn idiot market diagram once again.

Once again: here is why one should never trust the media, especially when it is serving ulterior conflicted interests. From the FT:

Fraught discussions on Wednesday – led on the creditor side by veteran technocrats Jean Lemierre, special adviser to the chairman of BNP Paribas, and Charles Dallara, managing director of the Institute for International Finance – have hit on a formula with Greek officials that an untested minority of bondholders could yet reject.


Several hedge fund managers that hold Greek debt have said they have not been involved in the talks and will not be agreeing with the “private sector involvement” (PSI) deal – which centres on a 50 per cent loss on bondholders’ capital and a reduction in the interest they receive.


Alongside them are insurance companies, fund managers and pension funds that also have little incentive in agreeing to the negotiated terms.


Several hedge fund managers that hold Greek debt have said they have not been involved in the talks and will not be agreeing with the “private sector involvement” (PSI) deal – which centres on a 50 per cent loss on bondholders’ capital and a reduction in the interest they receive.


Alongside them are insurance companies, fund managers and pension funds that also have little incentive in agreeing to the negotiated terms.


The creditor steering committee Mr Lemierre and Mr Dallara head represents bondholdings worth an estimated €155bn of Greece’s outstanding €260bn debt. That leaves a further €50bn or so of such uncanvassed private bondholders once European Central Bank and eurozone national central bank holdings are excluded, according to estimates by JPMorgan.


It is these private bondholders that must now be brought on board for a negotiated settlement if the Greek government is to succeed in its goal of a “voluntary” debt swap on its full borrowings and avoid a default.


“The [expected] agreement is a short-term fix. The market will be happy with it for a few days or a week but then we run into the hard stuff,” said an executive at one multibillion-dollar hedge fund that owns Greek bonds and has not been party to the negotiations. “The hard part is going to be getting the rest of the bondholders [outside the creditor committee] to agree.”

Punchline in 3...2...1...

Even members of the committee concede the process is unlikely to succeed in time for the crunch date: a €14.5bn bond repayment falling due on March 20.

And here is why naive Bloomberg reporters should not report anything and everything they hear hook, line and sinker:

“As a firm we are not convinced that any deal today is the last deal,” said Robert Rauch, director of research at the $2.7bn hedge fund Gramercy, which led negotiations for bondholders in the restructuring of Argentina’s debt in 2007. “This is a multiplayer negotiation and not all the players are even at the table.”


Gramercy is one of numerous hedge funds that say they have avoided buying into Greek debt – even though it has been trading at huge discounts in recent months – because they still do not see it as cheap enough.

The story from here on is familiar to all who have been following our narrative on this matter since June:

The options available to Greece and its advisers, Lazards and Cleary Gottlieb, should full agreement fail are hardly attractive. Foremost among them would be Greek legislation to insert “collective action clauses” into the country’s existing debt stock.


Such clauses could be exercised to force a recalcitrant minority of bondholders to agree new terms, but in doing so they could trigger credit default swaps written on Greek debt – a dangerous move that could trip the eurozone into a full-blown banking crisis.


Part of the problem was that many of Greece’s unknown creditors were thought to be holding out for exactly such a CDS trigger, one fund manager said.

Translation: subordination cometh. But we will touch upon this topic in two months, when everyone else is talking about it and/or is an expert on it.

And since everyone is now at least a broad bankruptcy expert, or very soon will be, here, courtesy of FT's Sam Jones, is a refresher on bankruptcy negotiations game theory, and why one pretty much never gets what one wants, absent spending 4-7 years in bankruptcy court first:

“There isn’t much of a reason for anyone to agree to the terms precisely because of the threat of CAC clauses,” said a fund manager who owns Greek debt. “If people think they are going to get forced into a deal anyway, then why agree to the terms before you have to? Especially if by not doing so you can trigger your CDS.”


Whatever the outcome of negotiations in the run up to March, there is little doubt among many bond investors about the worth of the PSI process.


As the Emerging Sovereign Group, a $1bn hedge fund owned by US private equity giant Carlyle, told its clients last year, European politicians have opened a “Pandora’s box” that now looks likely to lead to a “repricing of sovereign default risk across the euro area”.

And with numbers like $500 billion, €1 trillion and even €10 trillion flying around, to make sure the firewall in advance of the Greek default is at least half full, if not half empty, we can guarantee readers that the repricing won't be higher. But it will take stocks the usual 6-8 weeks to grasp what is patently obvious to anyone who has put in even 10 minutes of work in analyzing the complete fall out from Europe that is about to hit.

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Wed, 01/18/2012 - 18:51 | 2076118 Ahmeexnal
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Wed, 01/18/2012 - 18:56 | 2076143 HedgeAccordingly
HedgeAccordingly's picture

if i had a trillion dollars.. id be rich - http://hedge.ly/zos0ra

Wed, 01/18/2012 - 19:04 | 2076172 Chris Jusset
Chris Jusset's picture

This Greek fiasco will NEVER go away ... it will be with us for all eternity ...

Wed, 01/18/2012 - 19:14 | 2076203 john39
john39's picture

no doubt, exactly what Goldman had in mind...

Thu, 01/19/2012 - 00:13 | 2076977 BlackholeDivestment
BlackholeDivestment's picture

...is that what Lucifer is calling himself now. Goldman? Lol  http://www.youtube.com/watch?v=wlNrQGmj6oQ&feature=related

Thu, 01/19/2012 - 01:07 | 2077062 Oh regional Indian
Oh regional Indian's picture

The absolute, cutting, strange and totally ironical statement is right here, paraphrasing...

Take Greece to Human Rights court? Human rights court? Bankster Spawn, aka SledgeHammer Hedge Funds are going to say their human rights have been violated?

is this even for real? Can it be? Next, greece will go to a war crimes tribunal for hoiting the feewings of wittle hedgies?

It goes from bad to bizzare in one fell swoop...




Thu, 01/19/2012 - 03:21 | 2077204 FreeSlave
FreeSlave's picture

Greece government is selling off it's real estate (govenemnt buildings, islands, land, etc.)  http://translate.google.com/translate?hl=en&sl=auto&tl=en&u=http%3A%2F%2... Translated from Lithuanian newspaper...

Thu, 01/19/2012 - 04:09 | 2077214 Ghordius
Ghordius's picture

ORI, this is not bizzare at all, just a very "logical conclusion":

1. Human Rights in Europe are still worth something

2. Corporations are People in the US

3. if you squint your eyes you'll can make the next "logical" step, humans=people and corporations=people becomes corporations are humans. With human rights, though with more lawyers than you and me, so with more rights than you and me...

I note with great satisfaction that ZH is loading up on the details of the Greek Bonds situation and is getting slightly away from the total adoration of the hedgies involved. Might be true that truth sets you free. Well done.


Meanwhile I had the pleasure of reading Tyler's comments and the back and forth further down. Just a little detail: corporate bankruptcy principles applied to sovereign defaults? LOL You might be very knowlegdeble about corporate bankruptcy, but please, historically every single sovereign default or restructuring has been an "ad-hoc" situation with lots of politics involved. Most of the people here seem not to understand what the word sovereign implies. Another telltale of our times?

Thu, 01/19/2012 - 04:14 | 2077226 Michael
Michael's picture

Liquidation and discharge of sovereign debt in write-offs are the only solution.

Thu, 01/19/2012 - 08:05 | 2077350 Oh regional Indian
Oh regional Indian's picture

Ghordius, perhaps the word sovereign as we understand is set to enter the history books>?

Sovereign man? hah!


Thu, 01/19/2012 - 13:51 | 2078271 Ghordius
Ghordius's picture

ori, it might be. And yes, I fully agree with you, the concept of "Sovereign man" is best answered with "hah!" followed by a "you don't understand half of it".

Though I do expect a backlash, at some stage, and sovereigns might be dumb, slow and cumbersome if you compare them with our dear hyper-multinational companies stacked with whizkids, but they still have fangs in form of courts, legislators, police, navies and armies. If you exasperate them too much, they sometimes get mad and change the rules.

Further down TD speaks about an eventual waterfall bifurcation event and he is correct. I can still envision a moment when another Paulson shows up and says: "give us X USD or the banking system goes down" and X is something in the ballpark of "seriously preposterous" and there is a rejection moment: "why do you have X losses? oh, you made bets on your capability of predicting the future? with our money? you are out of your mind, the derivative contracts you hold so dear are now void and illegal, retroactively - it never happened, period".

Plenty of such moments in history when sovereigns realize that legal does not mean moral or sane - sometimes something has to be just threathening enough. The parasite can only go that far until the hosts either dies or fights it. And it's seriously difficult to kill sovereigns.

Of course, for some of the Anglophone financials guys that never saw the frontier of the empire, this is fantasy - they think that contract law was somehow given by Moses on an iTablet, they don't see or believe in the fangs of the beast, only the teats on which they are suckling...

Wed, 01/18/2012 - 19:15 | 2076206 duncecap rack
duncecap rack's picture

Sysaphus(sp?) might have some advice for the negotiators.

Wed, 01/18/2012 - 19:50 | 2076314 The Big Ching-aso
The Big Ching-aso's picture



All this is akin to being 'asked' to take in the ass first so others watching in line can determine if there's an acceptable amount of pain.

Wed, 01/18/2012 - 21:09 | 2076538 flacon
flacon's picture

European talk, talk, talk, talk, talk, talk, talk, !!! BAM !!!

Wed, 01/18/2012 - 21:42 | 2076625 economics1996
economics1996's picture

No deal because the bastards are flat assed broke.

Wed, 01/18/2012 - 21:38 | 2076615 Montgomery Burns
Montgomery Burns's picture

Appropriate it's happening with "Greek" bonds then.

Wed, 01/18/2012 - 19:41 | 2076315 redpill
redpill's picture

Sisyphus, who compared to these morons was incredibly productive.

Wed, 01/18/2012 - 23:05 | 2076786 Chris Jusset
Chris Jusset's picture

I agree with your excellent post ... except for one thing: the Euro-banksters are imbeciles rather than morons ... But you were damn close ...

Thu, 01/19/2012 - 01:14 | 2077074 BlackholeDivestment
BlackholeDivestment's picture

...Sysaphus you say? ...Dithspicable! http://www.youtube.com/watch?v=DcMFsgA9iPo

Wed, 01/18/2012 - 20:53 | 2076498 Gamma735
Gamma735's picture

Oh, it will go away.  Once they default.

Wed, 01/18/2012 - 20:27 | 2076437 The Alarmist
The Alarmist's picture

Scene from Austin Powers 2019 ...


Dr. Evil over headset to world leaders:  "That will be ... one trillion dollars!"

World Leaders (after raucous laughter):  "Yeah, no problem.  Do we get fries with that, or is that another trillion?"

Wed, 01/18/2012 - 23:58 | 2076946 PSEUDOLOGOI

If I had a trillion dollars, obviously I woudn't care about anything...

Therefore, one day I would just wake up and decide to build a long silver road and send Morgy to the cemetary...

But I don't have a trillion dollars...

More correctly: it's not legal for me to electronically print the trillion dollars, even though this would be a "green" way to print it. Oh well... Sigh...

Thu, 01/19/2012 - 07:35 | 2077335 Arkadaba
Arkadaba's picture

It used to be a million .... http://www.youtube.com/watch?v=LHacDYj8KZM

Wed, 01/18/2012 - 19:31 | 2076275 ElvisDog
ElvisDog's picture

Oh come on, how many times have we been through this Kabuki Theatre? They will wring their hands, and talk tough, and in the end they will cave in and do whatever the bankers want. I don't even get upset about it any more. It just is what it is.....

Wed, 01/18/2012 - 19:42 | 2076317 stocktivity
stocktivity's picture

Futures are up...maybe the market is right and all of us here on ZH are the ones that are wrong.

Wed, 01/18/2012 - 20:04 | 2076376 Cole Younger
Cole Younger's picture

My thoughts exactly. I keep hearing the sky is falling yet nothing happens. Who the fuck to believe?

Wed, 01/18/2012 - 20:28 | 2076442 roy10
roy10's picture

Just look at the markets - Yields on peripheral EU debt is down from peak levels. Even Libor rates are trending down, which is exactly what prompted the 2009 rally.

Many things could still happen, but the stress in the market is clearly fading.

Wed, 01/18/2012 - 21:03 | 2076520 Cheesy Bastard
Cheesy Bastard's picture

The bots that bid the markets up see 2 letters. QE.  Any little guy who plays in this scam will look in the till to find his money, and see 2 different letters.  MT.

Wed, 01/18/2012 - 21:18 | 2076561 roy10
roy10's picture

Pretty much. What you need to realize is that the LTRO is having the exact same effect as the QE. The Euro is tanking and the risk trade is on steroids. We’re back in a QE world and if history has taught us something, we can expect a steadily rising market as long as the QE (LTRO) is in action.

Wed, 01/18/2012 - 21:26 | 2076583 Cheesy Bastard
Cheesy Bastard's picture

A rose by any other name...

Wed, 01/18/2012 - 21:54 | 2076661 economics1996
economics1996's picture


Stoctivity and others, you people on this board are traders and players and you have not seen this game before?  QE will send the financials higher, until the dope runs out, and the dope is having less and less affect on the patent.  

With the trillions in liquidity there could very well be a boom, just like the housing boom, but it will be much shorter in duration and what will cause the boom to bust will be the spike in prices, especially energy.

This has been the Obama/Bernanke game plan all along, one more bubble, get re-elected, and move to fascism, dictatorship.   The plan worked well for Bush in 2004.  Obama and Bernanke must be wondering what they are doing wrong and why the bubble has not appeared up to now.

If you are foolish to be in the market long remember during the Weimar Republic days the stock market was always going up, up, up, but when it was all over actual gains adjusted for inflation DECLINED 33%! 

You people should know this crap, you are the traders not me, I am just a stupid economist that reads a lot of books.



Wed, 01/18/2012 - 22:11 | 2076694 Harbanger
Harbanger's picture

I don't hear too many people here blaming BO or insinuating that this was premeditated. +1

Wed, 01/18/2012 - 21:57 | 2076665 jcaz
jcaz's picture

LOL- Roy,  the clouds must be so pretty up there in the Ivory Tower.....

Dude, pay attention- QE failed.

Stocks are always the last to get the message.

Try reading half of what Tyler posts in his blog- you'll get the clue.

Wed, 01/18/2012 - 22:05 | 2076682 roy10
roy10's picture

I don't know how you can claim that QE failed since we don't know what the world would look like if there was no QE. In any case, QE was very effective in giving the market a short-term boost and that's what we're seeing right now.

Thu, 01/19/2012 - 07:30 | 2077334 Arkadaba
Arkadaba's picture

LOL, yes QE has given the markets a boost because that was what it was intended to do. Has QE helped mainstreet? No. Has it helped the US re-figure itself in a post-industrial world. No. Has it helped hide the losses of some very big banks? Yes.

Thu, 01/19/2012 - 12:07 | 2077979 Leopold B. Scotch
Leopold B. Scotch's picture

Well, there is little doubt the intervention had an affect on prices.  I think that was his point.

Wed, 01/18/2012 - 22:38 | 2076765 FMR Bankster
FMR Bankster's picture

That's the thing about the sky falling. Never happens when you want it too. Markets are pretty easy to push around now that ABSOLUTELY NOBODY plays anymore. And frankly, this sh*t could go either way. They could pump in 50% more money and stocks could go up 30% or we could have a deflationary collapse. Best to stick to things that will retain value over time.

Wed, 01/18/2012 - 20:18 | 2076407 Elwood P Suggins
Elwood P Suggins's picture



Zero Hedge always talks about doom

The stock market continues to boom

The Zero Hedge bitchez

See nothing but glitches

And years of incredible gloom

Wed, 01/18/2012 - 21:08 | 2076539 homersimpson
homersimpson's picture

Well go long then and share a room with Robotard so you clowns can trade after the fact predictions.

Wed, 01/18/2012 - 22:04 | 2076679 economics1996
economics1996's picture

Elwood, do yourself a favor.  Look at the DJIA the last 10 years; look at the gains as a percent.  Look at the price index and gains as a percent.  Subtract DJIA from Inflation = XXXX

Look at the monetary base over the last 10 years.

Look at gold/silver the last ten years.

Look at the plans for more quantitative easing.  Do yourself a favor and do a little research.

Wed, 01/18/2012 - 21:22 | 2076572 Teamtc321
Teamtc321's picture


Your post is not accurate. I can not speak for other reader's but can do so for myself. This Zero Hedge "bitch" as you put it has read, studied and learned a tremendous amount's about the financial system's and there function's.

I won't get long winded here but the knowledge that flow's through these post and also some of the reader's responses is extremly valuable to the person that actually takes the time to focus with a open mind.

Now with that said, 

Ron Paul  2012




Wed, 01/18/2012 - 21:58 | 2076670 economics1996
economics1996's picture

I totally agree.  The education level and knowledge of these posters is by far much better than any board I have been on.

Thu, 01/19/2012 - 03:20 | 2077205 Harbanger
Harbanger's picture

Just curious..which Republican is your 2nd choice if Ron Paul isn't nominated?

Thu, 01/19/2012 - 05:54 | 2077292 Cast Iron Skillet
Cast Iron Skillet's picture

"none of the above." ... write-in Ron Paul

Thu, 01/19/2012 - 08:11 | 2077355 StychoKiller
StychoKiller's picture

George E. TyreBiter

Wed, 01/18/2012 - 21:27 | 2076586 NewThor
NewThor's picture

There was once a 16 trillion dollar debt,

which the money lover's liked to forget!

Instead, they squeal with glee at all the

free money at the cost of slavery!

They cuddle their cash so bold, and say

"I've inherited the world and sold my soul!

I live to serve my fiat masters, and I do

what I'm told!"

Wed, 01/18/2012 - 21:58 | 2076668 jcaz
jcaz's picture

Ummm, "boom", Elwood?


This your first stock market?

Wed, 01/18/2012 - 20:03 | 2076371 Eireann go Brach
Eireann go Brach's picture

Can you just imagine the raping and pillaging that went on in the financial markets before the onset of "tell the truth" sites like Zero Hedge..it is shuddering to think what innuendo and lies was spread via the media outlets a few years that was not discounted by anyone!

Wed, 01/18/2012 - 22:50 | 2076792 RiverRoad
RiverRoad's picture

Couldn't make it through the day without ZH's priceless translations of what passes for news out there in MSM land.

Do NOT follow this link or you will be banned from the site!