Second Greek Re-Bailout: Terms, Conditions And Next Steps

Below are the main points agreed to by Greece to re-secure the €130b bailout, first agreed upon in July 2011, courtesy of Bloomberg.

  • Debt-swap to start in the next few days; involves swap for EFSF bonds; new bonds pay a coupon of 2.0% until 2014, 3.0% from 2015 to 2020, then 4.3%
  • 53.5% haircut for investors vs 50%
  • ECB’s profits from Greek bonds disbursed to national central banks, to be deployed to reduce Greek debt
  • Successful PSI operation a necessary condition for a success of the program: now this is an issue, since the PSI will almost certainly fail and CACs will have to be enforced which bring up our question - is the usage of CACs in the "bailout" a Material Adverse Change clause, and is thus the loophole for collapsing the deal altogether?
  • Remains to be seen if “slightly harsher” PSI terms are enough to trigger CDS, UBS says
  • Greece’s government has reserved right to enact CACs

IIF:

  • IIF says PSI would be the largest ever sovereign debt restructuring
  • UBS FX strategist Geoffrey Yu notes that IIF appeared to stop short of giving the deal full endorsement, calling on members to consider it “carefully”
  • Euro area, IMF to provide additional EU130b to 2014
  • Interest rates on borrowing cut to 150bps vs 200-300bps
  • Greek parliament to vote on a constitutional provision to ensure debt servicing payments prioritized
  • Quarterly interest rate payments to be paid into a segregated account
  • A permanent ‘troika’ task force will be in Greece to ensure adherence to the terms and conditions of the package
  • Greek debt/GDP now targeted at 120.5% in 2020
  • Analysis by IMF, European officials shows debt/GDP may only fall to 160% by 2020 vs 120.5% target
  • Eurogroup to reconvene in early March on debt swap

NEXT STEPS:

  • German parliament will seek to approve deal Feb. 27
  • Finland expects to discuss bailout in week of March 12
  • Dutch Finance Minister Jan Kees de Jager has mooted possibility of waiting until after Greek elections (expected April 8), according to Rabobank

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