Monday 27 February 2012

PSI prospectus is out. (Corrected)

Updated version HERE

For those who breath heavily at the sight of the Greek PSI offer the official proposal is out on the www.greekbonds.gr. 
After clicking the many disclaimers you come to the point were you can download all the documents in PDF form. We will publish the main points later.Furthermore the Greek Bond Holder Act that defines the "amendments" or the retrofitting of the CAC's can be found here (in Greek, it is the 4050 ΦΕΚ 36 - 23.02.2012 στις 23.02.2012 )



Finally the offer to exchange and amend the Greek bonds was launched. It is a rather complicated offer and reading it sometimes feels that its purpose is to confuse rather than enlighten the investors into making a decision. If retail or non-institutional investors try to read it, they would almost certainly suffer a stroke. Furthermore, the Invitation cannot be forwarded to interested bondholders as this is illegal. They interested parties should go to the Greek website (www.greekbonds.gr) tick on all the disclaimers and download the 166 page document and then make up their minds. And this has to be done by 9pm CET on 8th March 2012 (unless it is extended, terminated or re-opened). I doubt that many retail investors have the requisite knowledge and time to comprehend this legal document. In any case retail investors were never consulted during the process.
Designated Bonds 
 The total amounts of bonds that will take part in the exercise are 205.6billion. Out of these 21.6Billion are under non Greek (domestic law). This leaves 184billion under Greek law.  Four bonds are exempt from the exchange (total of 7.98billion). They were also exempt in the first version of the PSI back in July 2011. We do not know the reasons. They are:

GR0326040236
2,716,000,000
Pharmaceutical (Zero)
GR0514017145
3,690,000,000
6M+130bp
GR0514018150
78,300,000
6M+83bp
GR0514019166
1,500,000,000
6M+63bp

Many loans were included from OASA, OSE for a total of 5.8billion. The famous Goldman Sachs swap does which is owned by the National Bank of Greece does not seem to be in the list.
However, out of the 205.6Billion only 177.309Billion would be considered for the amendment that will introduce the CAC's.
Timeline
The offer was initiated on the 24th February and would terminate on the 8th March. The settlement would be on the 12th March 2012. The republic has the right to revoke the offer or extend it by 4pm CET 7th March.
For the foreign law bonds the bondholder’s meeting would be on the 24th-27th March and the settlement on the 11th April. 
Mathematics of CAC’s
Here is the fun part. By choosing to participate in the exercise (with Greek law bonds) whether you want to tender your bonds or not exchange you give irrevocable consent to amend the bonds with the proposed CAC’s. In other words:
  • Greek law bonds
    1. If you tender your securities for exchange then you automatically vote for the CAC.
    2. If you refuse to tender but participate then you can still vote in favour of the amendment to introduce CAC.
    3. If you do not vote for the CAC you cannot submit your bonds.
    4.  If you do absolutely nothing then you do not tender any bonds and do not give your consent for the CAC. In this case you are not counted towards the CAC’s. 
  • For the foreign law bonds my understanding is that you have the choice to participate in the tender offer and you automatically consent to CAC’s being introduced or to vote against the introduction of the CAC’s and not tender your bonds. In the first case the meeting that is going to take place later in March (24th-27th March). 
  • Blocking: If you participate your securities are blocked anyway.
 CAC’s would be introduced almost certainly
In order for the CAC’s to be introduced at least 50% of the total aggregate amount must participate and 2/3 must give consent. If only 88.65 billion (or 50% of the total 177.3billion) participate then only 59billion are required. Thus we should expect that the CAC would be introduced almost certainly to the Greek law bonds. Just the Greek domestic banks and funds holding may be enough to introduce the CAC’s. However, later on they say, that if the participation is less than 75% participation the whole thing is abandoned. 
Greece Reserves the Right to Activate
The introduction of the CAC’s would not in itself mean that they are going to be Activated. This is somewhat conflicting if one reads carefully the Greek law 4050/12 which states that they are automatically activated. They also mention that this law (4050/12) is not incorporated by reference in this Invitation. (page 4). It is all very confusing and perhaps a clarification is needed here.
Nevertheless, the Republic in the Invitation asserts that: 
  •  The exchange would proceed if there is 90% participation. i.e more than 185.062Billion. In this case the Republic may or may not activate the CAC’s. This would leave around 20.5Billion of Holdouts. Many of these would be the Foreign law bonds.
  • If the participation is between 75% and 90% then the Republic may go ahead after consulting the official sector (Germany) to proceed with the offer. It may further activate the CAC to push the participation up to 90% or more. Here the Invitation uses the word “intents”. In other words they leave the options open. 
  •  If the participation is less than 75% and the consent on the CAC’s is less than 75% of the total debt then the republic will not proceed with the PSI. 
ECB exemption and HoldingsThe ECB and the NCB apparently had 56.5billion. Working backwards one can infer how much of each bond the ECB+NCB owned. The table below may not be entirely correct (as it sums to 57billion) but is a good indication of what they bought for the so called Monetary purposes:

Issuer
ISIN
Currency
Coupon
Maturity
Original
ECB Inferred hold
Percentage
Hellenic Republic
GR0110021236
EUR
4.30%
20-Mar-12
14,433,800,000
4,668,187,000
32.3%
Hellenic Republic
GR0124018525
EUR
5.25%
18-May-12
8,000,000,000
3,334,299,000
41.7%
Hellenic Republic
GR0114020457
EUR
4.10%
20-Aug-12
7,719,000,000
3,132,968,000
40.6%
Hellenic Railways
FR0000489676
EUR
4.92%
13-Sep-12
200,000,000
10,000,000
5.0%
Hellenic Republic
GR0508001121
EUR
float
31-Dec-12
45,710,000
22,852,857
50.0%
Hellenic Republic
GR0512001356
EUR
6M+2%
20-Feb-13
5,820,000,000
443,278,000
7.6%
Hellenic Republic
GR0110022242
EUR
4.51%
31-Mar-13
60,710,000
24,281,428
40.0%
Hellenic Railways
XS0165688648
EUR
4.50%
02-Apr-13
430,000,000
17,500,000
4.1%
Hellenic Republic
GR0124021552
EUR
4.60%
20-May-13
9,079,000,000
4,588,434,000
50.5%
Hellenic Republic
GR0128001584
EUR
7.50%
20-May-13
2,497,560,000
1,004,866,421
40.2%
GREECE
XS0372384064
USD
4.63%
25-Jun-13
1,079,136,691
49,869,237
4.6%
Hellenic Republic
GR0124022568
EUR
3.90%
03-Jul-13
410,330,000
84,301,000
20.5%
Hellenic Republic
GR0110023257
EUR
4.43%
31-Jul-13
128,570,000
64,284,284
50.0%
Hellenic Republic
GR0114021463
EUR
4.00%
20-Aug-13
5,850,000,000
2,169,751,000
37.1%
Hellenic Republic
GR0124023574
EUR
4.52
30-Sep-13
299,360,000
150,000,000
50.1%
Hellenic Republic
GR0326043263
EUR
zero
22-Dec-13
1,854,000,000
248,651
0.0%
Hellenic Republic
GR0128002590
EUR
6.50%
11-Jan-14
4,552,000,000
1,853,030,412
40.7%
Hellenic Republic
GR0124024580
EUR
4.50%
20-May-14
8,523,000,000
4,154,347,000
48.7%
GREECE
XS0097596463
EUR
VAR
21-May-14
70,000,000
1,000,000
1.4%
Hellenic Republic
GR0124025595
EUR
4.50%
01-Jul-14
423,970,000
30,003,000
7.1%
Hellenic Republic
GR0112003653
EUR
3.99%
25-Jul-14
207,140,000
51,782,854
25.0%
Hellenic Republic
GR0114022479
EUR
5.50%
20-Aug-14
12,500,000,000
3,958,820,000
31.7%
Hellenic Republic
GR0112004669
EUR
4.11%
30-Sep-14
114,290,000
28,575,713
25.0%
Hellenic Republic
GR0124026601
EUR
3.70%
20-Jul-15
9,585,000,000
3,491,500,000
36.4%
Hellenic Republic
GR0114023485
EUR
6.10%
20-Aug-15
8,000,000,000
3,188,300,000
39.9%
Hellenic Republic
GR0114024491
EUR
3.70%
30-Sep-15
214,290,000
42,861,427
20.0%
Hellenic Republic
GR0124027617
EUR
3.70%
10-Nov-15
424,970,000
50,003,000
11.8%
GREECE
XS0357333029
EUR
FRN
11-Apr-16
5,600,000,000
52,800,000
0.9%
Hellenic Republic
GR0516003606
EUR
VAR
21-May-16
204,350,000
34,056,840
16.7%
Hellenic Republic
GR0124028623
EUR
3.60%
20-Jul-16
7,750,000,000
2,307,593,000
29.8%
Hellenic Republic
GR0116002875
EUR
4.02%
13-Sep-16
171,430,000
28,572,857
16.7%
Hellenic Republic
GR0326038214
EUR
Zero
27-Dec-16
383,740,000
49,400,731
12.9%
Hellenic Republic
GR0118014621
EUR
4.23%
01-Mar-17
400,000,000
57,142,857
14.3%
Hellenic Republic
GR0528002315
EUR
6M+0.09%
04-Apr-17
4,985,000,000
48,000,000
1.0%
Hellenic Republic
GR0118012609
EUR
5.90%
20-Apr-17
5,000,000,000
1,353,800,000
27.1%
Hellenic Republic
GR0518071916
EUR
float
01-Jul-17
83,517,000
11,930,645
14.3%
Hellenic Republic
GR0124029639
EUR
4.30%
20-Jul-17
11,440,000,000
3,877,550,000
33.9%
Hellenic Republic
GR0118013615
EUR
4.68%
09-Oct-17
250,000,000
35,714,286
14.3%
GREECE
XS0260024277
EUR
FRN
05-Jul-18
2,100,000,000
14,000,000
0.7%
Hellenic Republic
GR0124030645
EUR
4.60%
20-Jul-18
7,732,000,000
1,856,239,000
24.0%
GREECE
IT0006527532
EUR
5.00%
11-Mar-19
200,000,000
17,117,000
8.6%
Hellenic Republic
GR0124031650
EUR
6.00%
19-Jul-19
15,500,000,000
3,752,450,000
24.2%
Hellenic Republic
GR0133001140
EUR
6.50%
22-Oct-19
8,192,000,000
2,016,982,997
24.6%
Hellenic Republic
GR0124032666
EUR
6.25%
19-Jun-20
5,000,000,000
1,366,350,000
27.3%
Hellenic Republic
GR0133002155
EUR
5.90%
22-Oct-22
8,930,000,000
1,306,698,000
14.6%
Hellenic Republic
GR0133003161
EUR
4.70%
20-Mar-24
10,462,000,000
1,305,056,000
12.5%
Hellenic Republic
GR0338001531
EUR
2.90%
25-Jul-25
8,648,344,001
63,440,801
0.7%
Hellenic Republic
GR0133004177
EUR
5.30%
20-Mar-26
7,000,000,000
936,706,000
13.4%
Hellenic Republic
GR0338002547
EUR
2.30%
25-Jul-30
8,344,875,000
100,062,350
1.2%
Hellenic Republic
GR0138001673
EUR
4.50%
20-Sep-37
9,000,000,000
132,800,000
1.5%
GREECE
XS0292467775
EUR
2.09%
25-Jul-57
1,779,540,800
1,188,800
0.1%