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Some Thoughts On 'Not Paying' Greek PSI Holdouts

Tyler Durden's picture


Via Peter Tchir of TF Market Advisors,

If Greece decides not to pay the holdouts that is fine for anyone with basis package on (which I think is the bulk of the $3.25 billion of net CDS still outstanding).  In fact a hard default is probably better for those basis package holders.  If Greece uses the CAC clause and gives everyone new bonds, the CDS will settle against the "cheapest to deliver" bond, which, depending on shape of yield curve, etc., would be the longest dated of the new bonds.  There is some risk that the new bonds trade at a level that is high enough that the CDS basis holders don't get 100  (they get 15 + 31.5% of average new bond price + (100 - cheapest to deliver new bond).  There are scenarios where they could get more than 100 in total.  It is also dependent on FX moves (the CDS is in $'s).  It is tricky, but if they get defaulted on, their bonds would remain outstanding and could be used as cheapest to deliver, ensuring a package value of close to 100.  So basis holders are unlikely to be swayed and may even prefer this.

There is nothing to stop Greece from paying the ECB on their bond holdings while not paying other bondholders.  There should be, but there probably isn't.  On the other hand it looks even worse than the PSI and may give English law bondholders some chance to get recourse against the ECB for their special deal.  Maybe they should argue that it had to be done as a tender to all bondholders and wasn't.  In any case, the hard default will make the situation even more strange than using the retroactive CAC law.  They seem to be able to do anything they want, but this will be messier for everyone.

I remain skeptical of anything anyone says in Greece, because they really don't seem that organized.  The length of time it took to get a complex exchange offer out is a shame for them, because it will likely cut back on the ability of some small institutions to process the "invitation" even if they wanted to meet the deadline.  Also, since November, didn't someone think to make a creditor committee that holds more than 20% of the debt?  On something where they have know all along they want/need 90%, couldn't they have found some more large holders to form the committee?  And with banks pretty much forced to agree to anything, with Greek banks being the most desperate, don't you think they should have got some more hedge funds involved?  Some of the funds that might actually vote no could have been involved?  Again, first PSI was last summer, but it became an integral part of the bailout back in November.

Confusion reigns supreme, though we are probably due for a China saves the world rumor any moment now, because too many people enjoy the fact that we haven't had a 1% down day yet this year.


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Tue, 03/06/2012 - 15:13 | 2229170 Everybodys All ...
Everybodys All American's picture

bs reigns supreme

Tue, 03/06/2012 - 15:24 | 2229224 knight99
knight99's picture


Your thoughts on the link below are appreciated. If CAC is used could they still find away NOT to pay on CDS bascially killing the CDS market?

Tue, 03/06/2012 - 15:35 | 2229279 redpill
redpill's picture

I predict deliberate, massive, chaos so that no one has any idea what is going one while the ECB sneakily makes sure all bankster buddies are taken care of and then lets the shit hit the fan.  Should be interesting, sure beats watching TV.

Tue, 03/06/2012 - 15:59 | 2229389 kaiserhoff
kaiserhoff's picture

Like a monkey fucking a football;)

Tue, 03/06/2012 - 16:58 | 2229748 Winston Churchill
Winston Churchill's picture

More like a monkey fucking a porcupine !

Tue, 03/06/2012 - 16:06 | 2229450 candyman
candyman's picture

Nobody can write a script like this, Fking real life theatre, a page turner. I cant wait for the climax!

Tue, 03/06/2012 - 16:45 | 2229688 RSloane
RSloane's picture

Yup, like by the end of the week.

Tue, 03/06/2012 - 22:10 | 2230750 Buck Johnson
Buck Johnson's picture

Bingo, that is exactly what will happen.  When it happens they will be looking to turtle and protect themselves and their banking buddies so that they can come back out and buy stuff up for the cheap, and even change laws.

Tue, 03/06/2012 - 15:15 | 2229175 Fortunes Favor
Fortunes Favor's picture

No 1% down on major avgs but the hollowing out of the Bull has been going on since beginning of Feb. THe transports have been leading the way lower.

Tue, 03/06/2012 - 15:16 | 2229179 treemagnet
treemagnet's picture

So, apparently the right people haven't been fucked over enough to pull out the keystone on this deal is how I'm reading this.  Who's next up on the food chain?

Tue, 03/06/2012 - 15:21 | 2229203 Gene Parmesan
Gene Parmesan's picture

Has Greece actually been relieved of its gold yet?

Tue, 03/06/2012 - 15:23 | 2229214 oogs66
oogs66's picture

They probably lost it ages ago and didn't know

Tue, 03/06/2012 - 15:31 | 2229256 Sudden Debt
Sudden Debt's picture

I've heard they hid it in the basement!

Tue, 03/06/2012 - 15:54 | 2229377 Gene Parmesan
Gene Parmesan's picture

They should make sure to check under all the rocks and stuff at the bottom of the big tank at their National Aquarium.

Tue, 03/06/2012 - 15:26 | 2229229 txsilverbug
txsilverbug's picture

Too expensive to transport, waiting on cheaper fuel prices.

Tue, 03/06/2012 - 15:23 | 2229217 Ted Baker
Ted Baker's picture


Tue, 03/06/2012 - 15:27 | 2229241 HelluvaEngineer
HelluvaEngineer's picture


Tue, 03/06/2012 - 15:29 | 2229255 fonzannoon
fonzannoon's picture

Holy shit I just laughed so hard.

Tue, 03/06/2012 - 16:07 | 2229449 CrashisOptimistic
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Loud Ted spells Favor and Rumor with a OUR.

Wed, 03/07/2012 - 02:15 | 2231242 StychoKiller
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One should NOT make fun of the keyboard-challenged (notice the lack of punctuation?)

Wed, 03/07/2012 - 02:38 | 2231272 Jacks Cold Sweat
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HelluvaEngineer coffee  exited my mouth @ 7 Mach

Tue, 03/06/2012 - 15:27 | 2229244 bdc63
bdc63's picture

... sounds market bullish to me! ...

Tue, 03/06/2012 - 15:31 | 2229264 Moneyswirth
Moneyswirth's picture


Tue, 03/06/2012 - 15:41 | 2229307 jcaz
jcaz's picture


Tue, 03/06/2012 - 17:46 | 2229953 Nobody For President
Nobody For President's picture


Tue, 03/06/2012 - 19:14 | 2230248 Awakened Sheeple
Awakened Sheeple's picture

I'm in fucking tears!

Tue, 03/06/2012 - 16:29 | 2229569 Dr. Kananga
Dr. Kananga's picture

Ted, as much as I warmly enjoy the scenario you've painted (the screaming and yelling from the dungeon is a very nice touch too), it's been pointed out time and again around here that there is no 'trigger' to pull on CDS.

As I understand it, the ISDA has to declare such things... after deliberating... with much, much deliberation... maybe for a long time... in a bunch of different places... and perhaps a study... and it's not entirely certain around here that they will declare an event (which also would have severe ramifications for CDS and bond markets.)

We've gone through the looking glass.

Tue, 03/06/2012 - 16:30 | 2229608 Scalaris
Tue, 03/06/2012 - 15:23 | 2229219 crawl
crawl's picture

I'm waiting for the good ole 3pm rumor to send the markets on a rocket ride to close in the green.

Tue, 03/06/2012 - 15:35 | 2229277 noob
noob's picture

Whee!!! First post. This is fun

Tue, 03/06/2012 - 16:07 | 2229463 bobola
bobola's picture

Pay of all your debt and buy some physical PM.

It then gets even more fun.

Tue, 03/06/2012 - 16:08 | 2229474 txsilverbug
txsilverbug's picture

You must be from the government to believe that you actually have the first post.  I read on ZH that you indeed were not the first post.  Just like the federal government, you will continue on believing you were the first post.  Are you planning on issuing any 'first post swaps' to insure your first post status?  If you must keep declaring false first posts, you must understand that the value of your first posts will continue to decline.

Tue, 03/06/2012 - 17:05 | 2229788 noob
noob's picture

It's now past 3:00pm, what do you make of that?

Wed, 03/07/2012 - 02:18 | 2231250 StychoKiller
StychoKiller's picture

Depends, are we talking 4:20, or happy hour? (Perhaps there's no difference!)  :>D

Tue, 03/06/2012 - 17:50 | 2229962 Nobody For President
Nobody For President's picture

The PPT , with no rumors, took a shot at it at 1550, but it was way too little, and way too late. 

Dow down +200, 1.57%

S&P broke 1350 to 1342 down 1.54%


Bloodbath day...

Tue, 03/06/2012 - 15:25 | 2229223 mogul rider
mogul rider's picture

The fact that idiots are buyign CDS's after this is the real joke.You get bent over and go back for more. OMFG

The financial world just proved they are nothing but retards

Tue, 03/06/2012 - 15:49 | 2229352 youngman
youngman's picture

They buy more to show the regulators they are covered in case of anything....its all dog and pony smoke and mirrors show now...

Tue, 03/06/2012 - 16:36 | 2229641 Dr. Kananga
Dr. Kananga's picture

As far as I can tell, there's only two uses now: (1) using it for accounting tricks, and (2) accumulating a blocking stake to push the PSI negotiators and the rest of Europe into a corner.

Tue, 03/06/2012 - 15:26 | 2229228 Hedgetard55
Hedgetard55's picture

Even the freaks don't want no Greeks now.

Tue, 03/06/2012 - 15:28 | 2229247 kito
kito's picture

wake me when dow drops below 10,000. thats my signal for all hands below deck......

Tue, 03/06/2012 - 15:43 | 2229315 Stanwick
Stanwick's picture

Tight stop for a tight ass

Tue, 03/06/2012 - 15:30 | 2229258 Joebloinvestor
Joebloinvestor's picture

The rumor mills are spinning today.

Over 1 TRILLION EUROS of exposure!

Well what the fuck does anyone expect when they leverage a bunch of crappy shit that no one pays any attention to as long as they are collecting fees?

If the EURO zone collapses over Greece, then they deserve it.

If the US economy collapses over Greece, WE REALLY DESERVE IT.

The scam was complete when they were able to buy debt and show it as an asset.

Tue, 03/06/2012 - 15:31 | 2229263 carbonmutant
carbonmutant's picture

Referendums Bitchez..

Tue, 03/06/2012 - 15:37 | 2229292 Moneyswirth
Moneyswirth's picture


Ides of March BITCHEZ!

Tue, 03/06/2012 - 15:54 | 2229312 Mercury
Mercury's picture

There is nothing to stop Greece from paying the ECB on their bond holdings while not paying other bondholders. can they resist the temptation?  Will the chaos they will cause by effectively blowing up sovereign bond insurance be enough to keep their finger off that trigger?

If that's their idea of an orderly non-default it certainly seems a lot worse than the "disorderly default" they're trying to scare us with.

Tue, 03/06/2012 - 16:02 | 2229409 kaiserhoff
kaiserhoff's picture

They do seem to lack any concept of "The Morning After."

Tue, 03/06/2012 - 15:43 | 2229313 Mercury
Mercury's picture

< dupe print >

Tue, 03/06/2012 - 15:43 | 2229321 j0nx
j0nx's picture

You either pay or you puck.

Tue, 03/06/2012 - 16:00 | 2229396 youngman
youngman's picture

Do you really think TPTB will let a banker lose money....we will see the last minute plea for government bailouts as the sky is going to fall screams from the bankers boardrooms to the politicians.....they will be saved again...and again..and again....its the Joe saver and middle class taxpayer that will pay the price for the banker follies.....the 50% on welfare.,....hell they have no idea what is going on....good luck gold and silver...we are getting closer every day..when we see banker against banker..we know the water has hit the level of their staterooms and the ship is sinking fast....

Tue, 03/06/2012 - 16:07 | 2229459 Hugo Chavez
Hugo Chavez's picture

Kill all financial oligarchs.

Win valuable prizes.

No purchase necessary.
Not available in all states.

Tue, 03/06/2012 - 16:58 | 2229751 SillySalesmanQu...
SillySalesmanQuestion's picture

+ 100

Tue, 03/06/2012 - 16:02 | 2229406 citta vritti
citta vritti's picture

any luck, we still won't have a 1% day - it'll be 2%

Tue, 03/06/2012 - 17:53 | 2229976 Nobody For President
Nobody For President's picture

Well, the DOW only went -1.57, but you got it on RUT - -2.06

(and I finally made out like a bandit.)

Tue, 03/06/2012 - 16:09 | 2229477 sessinpo
sessinpo's picture

"I remain skeptical of anything anyone says in Greece, because they really don't seem that organized."


From conversations I've had with people in Greece, most don't even know what they are really dealing with other than financial depression. In other words, they don't even know who their real enemy is.

Tue, 03/06/2012 - 16:17 | 2229529 bahaar
bahaar's picture

Don't understand what the article says.  So Greek bond holders are going to take a massive haircut and the CDS they bought is pretty much worthless?  So who'll buy risky bonds in future?

Tue, 03/06/2012 - 16:39 | 2229661 Dr. Kananga
Dr. Kananga's picture

Yes and no one.

Tue, 03/06/2012 - 17:11 | 2229812 Evil Bugeyes
Evil Bugeyes's picture

So who'll buy risky bonds in future?

The same people who bought Greek bonds. Remember, Greek bonds weren't considered risky when they were first sold. UST's and JGB's are considered safe now and everyone is snapping them up before the ink even has time to dry. The US and lots of other governments are doing the same things that Greece did, but somehow the idiots running the financial system don't see any connection.

Tue, 03/06/2012 - 16:42 | 2229675 Olympia
Olympia's picture

This is how things work in all countries. Whatever used to belong to their people, today it belongs to the multinational companies of the Club. People were betrayed by their given leaderships and they lost everything. Capitals and markets were handed to the Club bosses. If you understand what is going on in Greece, you can understand what is going on in Britain, France, and Germany etc..



Tue, 03/06/2012 - 16:44 | 2229682 Imminent Collapse
Imminent Collapse's picture

Don't worry, they will dodge this bullet.  Not sure how, but they have been planning this for too long to get caught on this one.  Now Portugal, Spain, Ireland, Italy...somewhere along the line things are going to get dicey.  No doomsday yet, I don't think.

Tue, 03/06/2012 - 22:59 | 2230882 Bringin It
Bringin It's picture

But you're Imminent Collapse aren't you?!?

No doomsday yet, I don't think.

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