Comments on: Greece’s default gets messier

By: dcurban1

dcurban1 — Wed, 29 Feb 2012 18:12:44 +0000

I believe that a number of private creditors are holding back in order to force the CAC and a credit event if the ISDA does not rule in their favor.

What Europe has done is created a bifurcated market for European sovereign debt where public holders will be treated differently than private holders creating two risk profiles depending on who is the buyer.

This will cause European yields to rise in the private market as everyone takes into account this new angle to credit risk.

Honestly, if you have to get this cute in crafting a solution then it is not a viable solution.

By: alea

alea — Wed, 29 Feb 2012 12:43:27 +0000

“While the ECB exemption was understandable, on the grounds that the ECB was part of the Troika…”

Nothing to do with the Troika, the ECB is not in position to exchange bonds with Greece as this would be direct monetary financing prohibited by statutes, same for the National central banks. EIB is different, it has de jure preferred creditor status by agreement with some countries to which it lends, it also owned by govt. some of them (EZ) funding Greece that would have to recap the EIB if it took (greek related) losses. It serves no purpose for the EIB to take losses and wouldn’t improve Greece position in any way since these losses would be charged back to Greece.

By: FifthDecade

FifthDecade — Wed, 29 Feb 2012 02:08:05 +0000

Aren’t you only describing half of the process here, that this is a mechanism by which Greece has debt written off by the ECB et all, using some three way gimmick? If all your doing is talking about one step in the process as if it is all the process there is, then you might well form the conclusion you have. I’m just saying, I think you’ve forgotten something…

By: johnhhaskell

johnhhaskell — Wed, 29 Feb 2012 02:07:10 +0000

DCWright- can you tell the difference between a 70% writedown and breaking even? If so, why did you make the comment that you made?

By: DCWright

DCWright — Wed, 29 Feb 2012 00:52:06 +0000

What makes this even messier is that the ECB is taking the “profit” it is making on the difference between the below-face-value price it paid for the bonds and the face-value price it is getting back from Greece and donating that “profit” to Greece. Which means, in effect, that it is not really getting a better deal than the private creditors. I don’t understand what possible reason the ECB has for first poisoining the market by forcing this de factro subordination and then not making any money out of the havoc it has wrought.

By: voodoobunny

voodoobunny — Tue, 28 Feb 2012 22:58:32 +0000

Felix,

Would it be fair to say that the first time any of the CAC bonds was favoured over a non-CAC bond, the non-CACs would be de jure subordinate? It sounds like if they don’t get enough participation to force full participation then the Credit Event is just a matter of time.