The Greek FM Mr Venizelos announced that the PSI talks are
close to completion. This is not the first time. On numerous occasions a PSI
deal was announced as imminent. This reminds me of Zeno’s Paradox. Every day we
run half the distance to the PSI completion, but we never get there. There is
however a deadline that many see as immovable, the 20th March 2012.
This is the date that the GGB4.3% needs to be repaid, all 14.4billion of it.
Working backwards from that date, we have the following tentative schedule:
·
Around one week may be needed to administer and
settle the new Greek PSI Bonds. Even this may be optimistic. Also the funds
need to be disbursed by the EZ.
·
Once the PSI is finalised, there should be at
least two weeks for the offer and to gather up any interest.
So, assuming everything goes to plan and participation is
very high, the PSI would need to be in place by the end of February (Friday 24th
of February).
If
on the other hand, it does not go according to plan and participation is low,
then a decision needs to be taken on whether to introduce and activate
CAC’s. Greece could in principle pass
the law any time in the next 7 days or by the 10th of February (Friday). But activating the CAC also requires
a meeting of the bondholders with the necessary majority. This may actually
take another week. So, if there is a need for coercive restructuring the PSI
must at least be done before the 17th February. In the case of a
coercive restructuring followed by a credit event, the EZ must have in place
contingency plans for possible contagion. The next 3Y LTRO is on the 29th
February (Leap year) and it may fall right in the middle of the PSI messy
offer.
Timing wise, this is a rather
restrictive schedule as it leaves very little room for errors or unforeseen
events. Markets should be prepared for a rough ride in the next few weeks.
