Counterparties: Greece’s latest bond deal
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Greece is buying back â‚¬10 billion of bonds it issued earlier this year, at between 30% and 40% of face value. As Landon Thomas notes, the expected average price of 32-34 cents on the euro represents a â€śpremium of 4 cents above the level where the bonds traded at the end of last weekâ€ť.
The program is part of the agreement Greece reached on November 27 to decrease its debt burden to 124% of GDP by 2020. That agreement allowed Greece to remain on track to receive more than â‚¬40 billion in vitally needed aid.
Sober Look cites a Credit Suisse report highlighting a huge positive of the plan for the Greek public sector:
Following the buyback, more than 80% of Greeceâ€™s debt will be held by the official sector and seems to be in the process of being â€“ for all practical purposes â€“ transformed into a â€śzero-coupon perpetual bondâ€ť. The average maturity on the EU/EFSF loans (which will soon represent 65% of Greek debt) is increased to 30 years, while there is a ten-year grace period.
Lee Buchheit, the dean of sovereign-debt restructuring, has referred to this as the â€ś12th of neverâ€ť strategy. And it works: Greeceâ€™s interest expense as a percentage of GDP will be below the Eurozone average — and even below the US.
Simone Foxman writes that the EU is looking to Greek banks, in particular, to tender into the exchange — although some Greek bankers donâ€™t seem to be very happy about the idea. Itâ€™s unclear what the contingency plan is if enough bondholders donâ€™t take the plunge, beyond a â€ścomplete reassesmentâ€ť.
The WSJâ€™s Matthew Dalton and Matina Stevis observe that there isnâ€™t much more the EU can do to help Greece, if this buyback doesnâ€™t work. And if you want to do the math yourself, hereâ€™s an interactive bond buyback calculator from the Thomson Reuters data team. — Ben Walsh
On to todayâ€™s links:
The impossibility of tablet-native journalism – Felix
“Thereâ€™s more to publishing on the iPad than just blindly reproducing antiquated print metaphors” – Ben Jackson
The best magazine to be seen reading on the (DC) subway – Ad Week