Wednesday 28 March 2012

No quorum on the CHF meeting. Results for other bonds

 Here is the result of the bondholder's meeting list so far. A total of 3billion have either rejected the amendment or failed to reach a quorum. Only 2 bonds voted yes to the exchange thus far totalling 456million. These are the results of the voting on the 27th as published by the Greek government.

Issuer Category ISIN  Result
Hellenic Railways ForLawGuar  FR0000489676  Not Passed
Hellenic Railways ForLawGuar  XS0208636091  Inquorate
OASA ForLawGuar  XS0354223827 Not Passed
Hellenic Railways ForLawGuar  XS0165688648  Not Passed
GREECE CHF  CH0021839524  Inquorate
Hellenic Railways ForLawGuar  XS0142390904  Not Passed
OASA ForLawGuar  XS0198741687 Inquorate
Hellenic Railways ForLawGuar  FR0010027557 Not Passed
Hellenic Railways ForLawGuar  XS0193324380 Inquorate
Hellenic Railways ForLawGuar  XS0215169706 Inquorate
OASA ForLawGuar  XS0308854149 Passed
Hellenic Railways ForLawGuar  XS0160208772 Inquorate
Hellenic Railways ForLawGuar  XS0280601658 Passed

With regards to the CHF bond Apparently (link here the bondholder's meeting (10am today in Zurich) to decide the fate of the CHF Greek bond failed to reach a quorum (Report is unconfirmed). The Swiss stock exchange report is here In this case the extraordinary resolution was not passed. This means that they will try again in the next few days/weeks. If the result is again negative then either Greece would have to keep on servicing the bonds or they will declare a stop in payments. Namely, a moratorium. This obviously is more seriously than the restructuring event due to the CAC.

This is what is been reported:

Thursday 22 March 2012

PSI Lessons to Investors

 As the Greek PSI is nearing completion it is important to draw some conclusions. The Greek debt tragedy went through many phases since its explosion in 2010 and it would be no surprise if there are more explosions in the future. So let us recap some of the more interesting points that became apparent the last two years.

Lesson 1. It is politics not economics.

Thursday 15 March 2012

CDS and GREECE bonds

The day that everyone is expecting is round the corner. On Monday the auction for the Greek CDS is going to take place. According to the most recent data the Net volume is around 3billion so no-one should expect any surprises. In fact most probably it is going to be a non-event. That is unless there is counterparty failure. Chances of this are again slim as the EBA stress test did not show anyone with significant or threating size. So overall the auction should pass un-eventfully. What is more interesting is the list of deliverables that has been published and the price that the auction is going to settle at. Normally, in a credit event like a bankruptcy one should expect the auction to come very close to were the distressed bonds are trading. However, this is not the case here. The Hell.Republic trigger the CDS because of a restructuring event that destroyed all the Greek law bonds and replaced them with new ones. Thus one cannot easily predict or correlate his hedging with the real losses he has suffered. This of course is much wide issue and one that is not going to be resolved any time soon.
In any case, the list of deliverable bonds has been published by ISDA (click here) and it consists of the new PSI beauties and the Greek foreign law bonds. The list excludes some of the Foreign Law guaranteed and the JPY bond.

Sunday 11 March 2012

Oριστικά «εκτός» το σενάριο της δραχμής

 Published in Sunday Kathimerini

Αποτελεί αναμφισβήτητα μεγάλη επιτυχία η ολοκλήρωση του PSI, πρωτίστως για τη Γερμανία και δευτερευόντως για την Ελλάδα. Το σχέδιο δεν είχε σκοπό να καταστήσει βιώσιμο το ελληνικό χρέος παρά τις φαντασιώσεις ορισμένων πολιτικών. Αν ο σκοπός ήταν η βιωσιμότητα, τότε θα έπρεπε να συμμετάσχουν όλοι στη διαδικασία και όχι μόνο ο ιδιωτικός τομέας. Αυτό το γνωρίζουν οι αγορές και για αυτό τα νέα ομόλογα ήδη υπόκεινται σε διαπραγμάτευση με απόδοση 20%. Η αγορά δηλαδή πιστεύει πως το PSI ήταν το πρώτο μεταξύ πολλών επερχόμενων χρεοκοπιών ή αναδιαρθρώσεων. Στο τέλος του έτους η Ελλάδα θα έχει χρέος σε ποσοστό του ΑΕΠ της τάξεως του 163%. Το θετικό και πολύ σημαντικό επακόλουθο, όμως, είναι η κατακόρυφη βελτίωση στην άμεση ταμειακή της θέση. Το 2012 τα χρεολύσια των 34 δισ. μειώνονται σε 11 δισ. ενώ το 2013 τα 31 δισ. γίνονται 8 δισ.

Friday 9 March 2012


As quoted on Bloomberg

PSI Results:
  • 152billion out of 177billion of Greek law Eligible bonds tendered or voted yes in the consent solicitation.  9.3billion refused to give consent. This means that 16billion did not participate. We do not know how many of the 152billion actually gave only their consent without tendering their bonds. 
  •  Of the rest (foreign law, Greek loans) 69% or 19.5billion submitted tenders of exchange or consents. Again we do not know the breakdown
  • This brings the total tender plus consent to 83.5% 
  •  Once the CACs are activated the amount could reach 86.2%-100%. I say could, and I give a range because the Foreign law solicitation has been extended to the 23 march and bondholders can change their mind till then. It also depends on the CAC numbers for each bond. But a likely figure would be around 96%

Thursday 8 March 2012


For whatever reason, percentage, CAC or altruistic suicide the PSI succeeds. What is the sequence of events that might follow.
1.      It is a German power game and Schauble would feel vindicated. He might even think that the success would propel him to the Chancellorship. The mighty Germany finally ruled over the bad markets. However, judging from the German record on bank bankruptcies or bailouts ….) one should be very sceptical about taking financial advice from them.
2.      New bondholders might want to hedge their 30Y interest rate risk by paying fixed on a 30Y swap. However, this assumes that Greece would not default before that again. A very unlikely event given the Greek debt dynamics and economy. Thus many would try to offload their new Greek bonds as they do not have a mandate for 30Y Greek credit risk and hedging it would be very expensive. Greek banks would find it very hard to hedge as this requires 30Y swaplines. Thus they will keep it in their books and amortise their losses for of the old Greek bonds. Overall, however, we might see some hedging driving the long end higher.

Wednesday 7 March 2012

What if?

 Reproduced also in IFR

What if questions are never easy to answer but an honourable attempt is better than not asking the question. So: 
For whatever reason, percentage or legal the PSI is rejected. What is the sequence of events that might follow.
1.      Let’s start by apportioning blame. If the PSI fails it would be not because of the Greeks. All the Greek banks and the majority of the Pension funds have signalled their willingness to tender. If the PSI fails it would be humble pie for Germany not for Greece. Germany is the major driver of this policy. Germany is responsible for pushing this bad solution to Greece even though they conceded that it is bad back in October 2011. So if the market fails the PSI it would be calling Germany’s bluff in a big way. It would not be punishment to Greece.

For the avoidance of doubt

Many talk about the 66.67% threshold. From page 22 of the invitation.

The confusion arises because of the bondholder's Act a translation of which can be found here.The crucial difference is that the above snippet refers to the actual Invitation going forward. It annuls the Invitation not the CAC's.

Tuesday 6 March 2012

Happy PSI Voting

Sir Arthur Eddington the famous British physicist and author of a book on relativity when asked if it is true that only 3 people in the whole world understand Einstein’s theory of Relativity he famously said “I wonder who is the third?”

In the same spirit I pose the question “Is there anyone in the world that understands the PSI invitation documentation?”. Because if there is there are thousands of investors, institutional and other that would love to hear from him. There are too many questions that remain unclear. What happens to the Japanese bonds/investors? How about non-qualified investors? What happens if I abstain from voting? Does the Republic have the right to alter the result after the voting by exempting some bonds from the counting? Is the 75% threshold an absolute one or a soft one that can be changed simply by a ministerial decision? Which laws does the Greek Bondholder’s Act 4050/2012 (introducing CAC) suspend? How about European law? Act 4050/2012 is invoking the “highest public interest” and “Mandatory provision” of Article 9 EU593/2008 (see box) which suspends the law applicable to contractual obligations.

The Swiss bond. Bondholders are getting organised.

The Hellenic Republic has made 3 invitations in parallel. One of them concerns the one and only Swiss bond. Issued by the Hellenic Republic and under Swiss law. It seems however that there are many legal constraints and issues with this bond and bondholders are getting organised. Here is their press release:

The Hellenic Republic Swiss Law-Governed Bondholders Invited To Join Ad Hoc Group
CHF 650,000,000 of 2 1/8% Bonds due 2013
ISIN CH0021839524

Monday 5 March 2012

A better tarnslation of Bondholders Act 4050

Unofficial translation of Bondholders Act 4050/12.
This translation is an improvement of the quick and dirty translation done by Andreas Koutras and it was done by
Vassilis Sourlas
Please do not rely on this translation for any decision as it is not official and may contain many errors, mistakes and misunderstandings. It is done only for information purposes.
We issue the following law that has been approved by the Greek Parliament
Article 1
1. For the purposes (application) of this article the concept of the following terms is as follows:
 a) As ‘title (instrument)’ is considered a bond, debenture or other title (instrument) of debt, in physical or dematerialized form (registered or book entry form), governed by Greek law and whose: aa) issuer or guarantor is the Greek State, bb) original duration (maturity) at the time of the first issuance exceeds twelve months and cc) the issuing date precedes the 31st December 2011.

Greek PSI Titbits

Disclaimer: Please do not rely on this note for any decision as it may contain many errors, mistakes and/or misunderstandings. If you have any questions please contact or call +44 207 5470341 (Deutsche Bank) or +44 207 9926237 (HSBC)

If you are reminiscent of your school comprehension days then the documents presented by the Hellenic Republic would be an excellent exercise. It would take more than few times reading and re-reading it to get any sense out of it. We tried but we do not give any warrants, guarantees, representations, acknowledgements or undertakings that we did so correctly and we accept no liability whatsoever for whatever your actions may be after reading this communication, including but not limited to, dying of boredom, committing insane acts or simply falling asleep.

Thursday 1 March 2012

Unofficial translation of law 4050 that introduced CAC

This is a rough translation of Law 4050/2012 that introduced the CAC in the Greek Bonds. The law was passed on the 23 Feb 2012.  Please do not rely on this translation for any decision as it is not official and may contain many errors, mistakes and misunderstandings. Only article 1 and 3 is translated.

The President of the Hellenic Republic
We publish the following law which the Greek parliament approved.
Article 1.
1.      For the implementation of the provisions of the present article we define the meaning of the following terms:
a)      “title” means a bond, a bond loan or any other loan title, in registered or book entry form which is under Greek law and
1.Issuer or guarantor is the Greek state
2.The original duration at the time of issuance was more than12 months
3.The issuing date preceded the 31st December 2011
b)       “eligible title” means any title that is defined by a decision of the council of ministers and in the invitation of the Greek state as defined in paragraph (2).
c)      “outstanding principal” means the amount of the eligible titles which has not redeemed according to the terms of the eligible title on the day which is defined by the invitation and  “aggregate outstanding principal” means the sum of the outstanding principals of all the eligible titles which are defined in the relevant decision of the council of ministers and in the corresponding invitation of the Greek state, as provided in paragraph (2) with no regard to the series, maturity, coupon or any other characteristics of the eligible titles.