Comments on: Adventures with Greek restructuring math http://blogs.reuters.com/felix-salmon/2011/07/26/adventures-with-greek-restructuring-math/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: kahmet http://blogs.reuters.com/felix-salmon/2011/07/26/adventures-with-greek-restructuring-math/comment-page-1/#comment-28989 Wed, 27 Jul 2011 06:48:48 +0000 http://blogs.reuters.com/felix-salmon/?p=9108#comment-28989 This article was -and continues to be, thanks to the commenters- a primary resource to me in digging deeper with the IIF article. Although I’m not clear as of now on all the aspects of the offer, I’d like to thank to all the contributors of this debate.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/07/26/adventures-with-greek-restructuring-math/comment-page-1/#comment-28983 Wed, 27 Jul 2011 01:52:16 +0000 http://blogs.reuters.com/felix-salmon/?p=9108#comment-28983 Felix I just want to say thanks for your great coverage of the nuts and bolts of the deal. The internet is a big place but if there is a better source of analisis and informed debate I haven’t found it yet!

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By: Kamekon http://blogs.reuters.com/felix-salmon/2011/07/26/adventures-with-greek-restructuring-math/comment-page-1/#comment-28961 Tue, 26 Jul 2011 16:34:40 +0000 http://blogs.reuters.com/felix-salmon/?p=9108#comment-28961 Having reread the IIF financing offer, I think that my previous comment may be incorrect and that “discount” refers to the reduction of principal only. However, isn’t it true that coupon payments are not collateralized at all (so in your example the escrow account isn’t further reduced by EUR45) – only the principal is, and partially at that?

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By: Kamekon http://blogs.reuters.com/felix-salmon/2011/07/26/adventures-with-greek-restructuring-math/comment-page-1/#comment-28960 Tue, 26 Jul 2011 16:07:33 +0000 http://blogs.reuters.com/felix-salmon/?p=9108#comment-28960 Felix, it’s a *discount bond* exchange. In other words, if you participate, you receive a zero-coupon bond, so there are no coupon payments (as such).

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By: Greycap http://blogs.reuters.com/felix-salmon/2011/07/26/adventures-with-greek-restructuring-math/comment-page-1/#comment-28959 Tue, 26 Jul 2011 16:05:29 +0000 http://blogs.reuters.com/felix-salmon/?p=9108#comment-28959 “the exchange offer is rather opaque”

It’s not nearly as opaque as you are making it. The IIF document you linked to states several times, clearly and unambiguously, that it is principal that is collateralized. So your first train of thought was OK and your second one jumped the tracks.

“the other question, of course, is when the money would be paid out of the escrow account”

OK, that question is not explicitly addressed. But why should it not be paid out immediately? It’s hard to find a vested interest that would benefit by keeping the money sitting in escrow; though conceivably the issuer(s) of the collateral bonds might not want to see them hit the secondary market. Overall, the scheme looks like a very plain vanilla attempt to guarantee 40% recovery – a convenient number.

“you probably have very wide latitude in where you mark the new debt”

In economic terms, maybe you do. But once again, the IIF document tells you where debt is going to be marked, if you would just read it properly: “All instruments will be priced to produce a 21% Net Present Value (NPV) loss based on an assumed discount rate of 9%.”

No doubt the real mark-down ought to result in a bigger loss, judging from market prices of Greek debt. But not many players have an interest in higher mark-downs, and the IIF plan seems engineered to endorse 21%.

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