I’m not sure why 100% isn’t maximum possible, but math and Greek politicians don’t seem to go well together.
I expect a number between 75% and 98%. I expect every bank and most regulated entities to vote for it – how many Greek bonds are held by Europe’s bad banks and bailed out banks? My guess is it’s a disgustingly high number.
Below 75% and my guess is they accept those offers and default on the holdouts – but only after extending the offer for a few more days.
Between 75% and 98% they use the CAC and try to move on. There isn’t enough time between now and March 20th to do anything more interesting.
Above 98% I will go and try out for the giants as starting quarterback, because clearly anything is possible. But if it is somehow above 98% (CDS is 1.5% and I expect mostly held in basis and no incentive to agree).
I don’t think it makes much difference whether the number is 77 or 95. All we will really learn is if any banks didn’t feel obligated or which hedge funds decided the plan was ok. Maybe the market will react differently if it is 77 or 87 or 97 but it really shouldn’t.
The Credit Event will settle smoothly. It is the net that matters, not the gross, and the net is relatively small. Any bank that doesn’t have money to pay on CDS they wrote, after LTRO is beyond inept. Any banks without enough collateral from any hedge fund that sold them protection is equally inept – though this should be an exchange based product or at least cleared.
The potential knock on effect will be if banks demand larger collateral requirements going forward and if other sovereign bonds start leaking again – especially since LTRO has margin calls of its own.
I doubt we get a Credit Event until next week as they likely won’t do it late on a Friday.
If we find out that the invitation has been extended I would get concerned that they didn’t hit the 75% threshold.
Some English law bonds might have to be dealt with separately if there were blocking votes, but there is time for that.
BN 03/08 16:58 *PAPADEMOS SAYS DEBT SWAP COMPLETION IS THIRD STEP TO LOAN PACT
BN 03/08 16:57 *PAPADEMOS SAYS DEBT SWAP TERMS ARE FAVORABLE
BN 03/08 16:57 *PAPADEMOS SAYS EXPECTS HIGH PARTICIPATION IN DEBT SWAP
BN 03/08 16:55 *PAPADEMOS COMMENTS IN EMAILED TRANSCRIPT FROM OFFICE
BN 03/08 16:55 *PAPADEMOS COMMENTED TO HIS MINISTERS IN ATHENS TODAY
BN 03/08 16:55 *GREEK PREMIER SAYS DEBT SWAP IS SIGNIFICANT PART OF LOAN ACCORD
Papademos Says Expects Maximum Participation in Greek Debt Swap
2012-03-08 17:03:33.912 GMT
By Maria Petrakis
March 8 (Bloomberg) — Greek Prime Minister Lucas Papademos
said he expected the maximum possible participation from
bondholders in a swap of Greek debt that is due to end today.
“Greece, with the support of its European partners, has
shaped an appropriate framework with significant incentives for
the debt exchange,” Papademos told his ministers in Athens
today, according to an e-mailed transcript of his comments.
“For this reason I look forward to the maximum possible
participation of the private sector, which will definitively
contribute to the economy’s adjustment endeavor.”
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