There have been a number of key dates that have come and gone without mishap. Each time, the ‘powers that be’ jumped in to put off the inevitable. They injected cash to keep the ship afloat. The problem is that we are beginning to see frustration from donor countries, and there’s a limit to how far they will go to rescue a nation of beach bums.
March 20th is another ‘do or die’ date that is looking increasingly likely to arrive without the EU stepping in to do anything to save Greece. Greece has been negotiating with private bondholders to try and convince them to take a 50% ‘haircut’ on their Greek debt. The bond holders originally seemed interested in the deal, but now – not so much.
If Greece can convince bond holders that it is in their best interest to see their Greek bonds cut in half, Greece will be able to have something like an orderly default.
Without the agreement, the default will be disorderly and could take down the EU and American financial systems.
We’ll see what happens as March rolls around.
Are you prepared?
Here’s an interesting article from Zero Hedge:
Submitted by Tyler Durden on 01/18/2012
Update: the NYT chimes in, just to make the point all too clear: “Hedge Funds May Sue Greece if It Tries to Force Loss”
Five minutes before market close yesterday, Bloomberg came out with an “exclusive” interview with Marathon CEO Bruce Richards, who may or may not be in the Greek bondholder committee any longer, in which the hedge fund CEO said that the Greek creditor group had come to an agreement and that the thorniest issue that stands between Greece and a coercive default (and major fallout for Europe) was in the bag, so to say. To which we had one rhetorical comment: “Well as long as Marathon is talking for all the possible hold outs…” As it turns out, he wasn’t. As it further turns out, Mr. Richards, was just a little bit in over his head about pretty much everything else too, expect for talking up the remainder of his book of course (unsuccessfully, as we demonstrated earlier – although it does beg the question: did Marathon trade today on the rumor it itself spread, based on information that was material and thus only afforded to a privileged few creditors, especially if as it turns, the information was false – we are positive the SEC will be delighted to know the answer). Because as the supposed restructurng expert should know, once you have a disparate group of ad hoc creditors, which is precisely what we have in the Greek circus now, there is nothing even remotely close to a sure deal, especially when one needs a virtually unanimous decision for no CDS trigger event to occur (yes, ISDA, for some ungodly reason, you are still relevant in this bizarro world). Which also happens to be the fascination for all the hedge funds, whom we first and then subsequently repeatedly noted, are holding Europe hostage, to buy ever greater stakes of Greek bonds at 20 cents on the dollar. Because, finally, as the FT reports, the deal is nowhere in sight: “Several hedge fund managers that hold Greek debt have said they have not been involved in the talks and will not be agreeing with the “private sector involvement” (PSI) deal – which centres on a 50 per cent loss on bondholders’ capital and a reduction in the interest they receive… Even members of the committee concede the process is unlikely to succeed in time for the crunch date: a €14.5bn bond repayment falling due on March 20.” But, wait, that’s not what Bloomberg and Bruce Richards told us yesterday, setting off a 100 point DJIA rally. Time to pull up the Einhorn idiot market diagram once again.