It may still be unclear just where Greece will get the ~€10 billion in cash needed to buyback up to 20 various tranches of the post-restructuring GGB2 bonds (full CUSIP list below), but what the Greek Public Debt Management Agency [7]announced today was the sound of money in the ears of the hedge funds that had bought up Greek bonds in the low teens several months ago, if not so much Greek banks many of whom may still have this debt market at up to par, as no matter which particular group of taxpayers ends up funding this "buyback" - a process that will have zero benefit to the Greek population who will see not one penny of the buyback proceeds (as described before [8]) - it is the hedgies that benefit, who also have clearly controlled the process from the beginning as the announced tender prices were well above the levels Greek bonds eligible under the buyback closed at on Nov. 23, even though Greece's lenders last week said they did not expect the bonds to be purchased for more than the closing price on that date. In other words, the Greek government lied to its people again for the benefit of wealthy financial interests yet again.
And sure enough, with the purchase price for most issues which will be set in a Ducth Auction, anywhere between 30.2% and 32.2% for the longer date issues, and 38.1% to 40.1% for the short-maturities, coming in higher than expected, the entire Greek bond market has risen to fresh post restructuring highs, as have bonds across the periphery, with Spanish and Italian bonds moving higher in price, on hopes that since Greece gets the benefit of massive bond upside from market lows, why shouldn't these two countries. After all, European taxpayers now appear to be the involuntary benefactors for the world's largest hedge funds, courtesy of their unelected Eurogroup leaders, and the IIF of course.
We now sit back in hopes of learning just where Greece will get the up to €10 billion in cash used to repurchase ~€30 billion in face notional
Details on the buyback:
Summary of Expected Terms of the EFSF Notes:
Issuer European Financial Stability Facility
Issue Not expected to exceed €10,000,000,000
Final Maturity Expected to mature on or about 6 months after the
Settlement Date of the Invitation
Interest Basis Zero coupon
Form Global Bearer Note deposited with Clearstream, Frankfurt
Clearing The EFSF Notes will clear through Clearstream, Frankfurt
Governing Law English Law
Full list of participating issues:
[9]
And more from Reuters:
Greece said it would spend 10 billion euros to buy back bonds in a bid to reduce its ballooning debt and unfreeze long-delayed aid, setting a price range above market expectations to ensure sufficient investor interest.
The bond buyback is central to the efforts of Greece's foreign lenders to put the near-bankrupt country's debt back on a sustainable footing, and its success is essential to unlocking funding Athens needs to avoid running out of cash.
There have been questions about whether it will tempt enough bondholders to cut Greek debt by a net 20 billion euros, the target set by euro zone finance ministers and the International Monetary Fund. The buyback plan announced on Monday appeared designed to quell those concerns.
"It indicates they really want the swap to succeed," said Ricardo Barbieri, strategist at Mizuho, on the pricing.
"Some investors might be tempted to participate in the swap because of the ability to simplify their position, should they wish to maintain exposure to Greece, otherwise an opportunity to exit totally, completely their positions at a level that is better than Friday's close."
The buyback will be conducted through a modified Dutch auction that introduces an element of competition among investors and set a price range above Friday's closing prices.
The range set varied from a minimum of 30.2 to 38.1 percent and a maximum of 32.2 to 40.1 percent depending on the bond maturities of the 20 series of outstanding bonds.
It featured a spread of two percentage points between the highest and lowest price offered on each bond.
The prices were well above the levels Greek bonds eligible under the buyback closed at on Nov. 23, even though Greece's lenders last week said they did not expect the bonds to be purchased for more than the closing price on that date.
The bonds, which have a nominal value of 63 billion euros, closed at between 25.15 to 34.41 cents in the euro on that date according to Reuters data.
DOUBTS REMAIN
Euro zone officials said the bloc hoped Greece would be able to repurchase at least 40 billion euros of its own bonds.
Athens unveiled the structure of the buyback before a meeting of euro zone finance ministers, at which Greek Finance Minister Yannis Stournaras will brief his counterparts.
Despite the better than-expected terms, some analysts said it remained to be seen whether the buyback would be successful. Greek banks are under pressure from Athens to participate, but there is skepticism over how many foreign investors will do so.
"I still have my doubts regarding how many investors will participate on the buyback at these prices," said Diego Iscaro at IHS Global Insight. "The prices may be higher than expected .. but my doubts are whether they'll be high enough to encourage a high participation rate."
Even if the Greek debt buyback is successful, Athens' long-term debt problems have yet to be fully resolved. Greece's EU and IMF lenders want to cut the country's debt - which is expected to peak at 191 percent in 2014 - to 124 percent of gross domestic product by 2020 but there has been speculation that some write-off of loans will be necessary.
Full release from PDMA (link [10]):