CDS and The "Secret" ISDA Committee

The "secret" committee of the International Swaps and Derivatives Association (ISDA) will meet today, to decide if the Greek haircut constitutes a credit event which would trigger credit default swap contracts (CDS).


Who are on the "secret" committee?

These guys:

ISDA Determinations Committees (effective 30 November 2011)

Americas
Voting Dealers
Bank of America / Merrill Lynch
Barclays
Citibank
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS

Consultative Dealers
BNP Paribas
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
Asia Ex-Japan
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Citibank
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
The Royal Bank of Scotland
UBS
Consultative Dealers
Nomura
The Royal Bank of Scotland
Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
Australia and New Zealand
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS

Consultative Dealers
Nomura
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
EMEA
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS
Consultative Dealers
Citibank
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
Japan
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Mizuho
Morgan Stanley
UBS

Consultative Dealers
Nomura
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)

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Greek Problem Sorted - LOL!

Some of the media are happily pumping the Eurozone line that the Greek problem is sorted, and that now the second bailout of Euro130BN has been agreed (after a marathon 13 hour session of finance ministers) we can all move on.

Not quite, aside from the fact that the Greek economy is sunk and that borrowing money to pay off debt will not resolve this problem; the private bondholders (sans ECB, which protected itself by sleight of hand last week) will have to take a NPV haircut of 74%.

Institute for International Finance (IIF) crisis resolution official Jean Lemierre was only told of the size of the haircut this morning.

The "party line" is that the creditors will voluntarily accept his haircut. The reality is that there will be a few who refuse to have their "assets" further written down, as such Greece will have to enforce the Collective Action Clauses (CAC) and force the recalcitrant bondholders to accept the 74% haircut (this of course is a default event).

Aside form that, all Greece has to do is to reduce its debt from 160%to 120.5% of GDP in 2020.

"Easy"!!!!

LOL!

This is not over, by any stretch of the imagination.

Here is the Sustainability Analysis by the Troika dated 15 February (as you can see, this will not work).

Greek Sustainability Proposal

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Greece Likely To Default

Handelsblatt has quoted unnamed central bank (ECB or German central bank?) sources as saying that Greece will fail to achieve a voluntary haircut of its debt, thus leaving the only option as being a compulsory write down (ie default).

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The Greek Tragedy Continues

Unsurprisingly yesterday's crucial meeting between Greek Prime Minister Lucas Papademos and the leaders of the three parties supporting his government failed to come to an agreement over the level of austerity required to be imposed in Greece, if it is to receive the second Euro130BN bailout.

A second round of talks is scheduled for today, as domestic unrest within Greece increases.

Don't hold your breath in the expectation of a clear and decisive solution being found or agreed upon.

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Papademos Meeting Postponed Again!

The crucial meeting between Greek Prime Minister Lucas Papademos and the leaders of the three parties supporting his government which was to today, has again been postponed (from its scheduled start time) to later this afternoon.

As noted yesterday, and the day before yesterday, if it can go wrong it will go wrong!

Rest assured, this meeting will continue to be postponed.

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Papademos Meeting Postponed

A crucial meeting between Greek Prime Minister Lucas Papademos and the leaders of the three parties supporting his government has been postponed until Sunday.

As noted yesterday, if it can go wrong it will go wrong!

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On Again Off Again - The Greek Farce Continues

As another week of rumour and counter rumour about an "imminent" deal on the Greek haircut comes to a close, the usual rumourmongers from the EU and Greece are proactively spinning that the "deal" is almost done.

However, a much rumoured meeting of EU finance ministers (in which the deal is to be discussed) appears to be in "on again/off again" mode.

The EU recognises that the meeting (allegedly next Monday) cannot take place until the "deal" is signed off. Therefore, displaying a lack of confidence in the hype over an "imminent" signing, the EU has said it expects finance ministers to meet when there is clarity on the Greek PSI debt swap (it will not confirm a date for the meeting).

This time next week we will still be awaiting the "imminent" signing of the "deal"!

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Change The Record Olli

The EU's optimist in chief, the EU Monetary Affairs Commissioner Olli Rehn, has stated for the umpteenth time that "Greek debt-swap talks are very far along, talks should wrap up in “coming days”.

He said this last week. 

Change the record Olli, no one believes you anymore.

Hire a new script writer to freshen up your tired old lies!

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Greek Haircut 70%

Andrew Neil has just Tweeted:

@afneil Andrew Neil

Greece supposedly one step away from a 70% haircut for private bondholders. Orig meant to be 50%. But will all bondholders agree?

 

I noted in September last year that if a deal is ever done, the haircut would be 80%.

Don't believe for one minute that a deal has been done, until a signed agreement has been published that stands up to rigorous scrutiny.

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Greece Off Track

Canadian Business reports that the troika have delayed a meeting with the Greek government to discuss ways of reducing employment costs.

The troika have called off a meeting planned for Tuesday and will hold it later in the week.

Jean-Claude Juncker, the Luxembourg prime minister is quoted:

"Everyone knows that Greece's consolidation program is off track.

Greece must live up to its commitments."

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The Fluid Greek "Deadline"

The Greek Prime Minister, Lucas Papademos, has said:

"Significant progress made in talks about PSI...We are seeking to conclude negotiations with the troika by the end of the week".

This of course is the same fluid "deadline" that moves ever further forward into the distance.

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No Deal Today - Don't Believe The Hype

Despite last week's hype from various "sources" within the EU, and the delusional IIF, (akin to the self congratulatory bullshit spouted by third world dictatorships) that a deal on the Greek haircut is imminent, reality has, once again, hit the fan.

The Euro Council meeting is under way, yet the much hyped "deal" is nowhere to be seen.

No surprises there then!

On top of this Angela Merkel has said that the second bailout tranche will not be finalised today, because the troika has not yet finished its assessment of the Greek economy.

Bloomberg quote her:

“We won’t have a thorough discussion of Greece because the troika is in Greece and we don’t have a result of the talks with the banks.”

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ECB Stands Back From Debt Talks

European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo has said that the ECB is not involved in the Greek debt talks.

This is hardly good news, if Paramo is speaking the truth, for those who are hyping the rumour that a deal is close at hand.

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The Troika's Wishlist

Reuters reports that the EU, IMF and ECB (aka troika) have drawn up a report which includes a list of measures they want to see enacted by Athens, before the Euro130BN bailout fund is released (always assuming of course the bondholders agree to their haircut).

This is all very nice. 

However, given that the bondholders have yet to agree terms of their haircut and the Greeks are in denial about the wishlist actually being binding or relevant (government spokesman Pantelis Kapsis said the government would try to negotiate some of the points), the chances of Greece avoiding a disorderly default are the same as that of a cat in hell.

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Rats Leaving The Sinking Ship

Unsurprisingly, given the failure to reach a deal on the Greek haircut, and the abrogation by the Greek government of responsibility for talking with bondholders (the Greeks have passed the buck to the Troika), hedge funds are now scrambling of offload Greek debt.

The New York Times reports:

"Hedge funds that in the past month or so have purchased an estimated 4 billion euros, or $5.2 billion, of beaten down Greek bonds that mature on March 20 are now trying to unload their positions, according to brokers and traders.

That is because it is becoming clear to one and all that Greece — under pressure from its financial backers — is preparing to impose a broad-based haircut that would hit all investors with a loss of 50 percent or more, whether they agree to the deal or not."

Meanwhile, private boindholders are meeting in Paris to determine their next course of action.

The ship is sinking fast, and not all the rats will escape in time!

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The Greek Clusterfuck Negotiations

Despite the hype form some sections of the ill informed media and from the EU, that the Greek deal on haircuts was almost in the bag, reality has hit the fan.

Eurozone finance ministers have rejected the current offer from bondholders, and have "demanded" that negotiations between the Greek government and Institute of International Finance (IIF) reach agreement on a lower average coupon.

Lovely!

The EU seems to be under the impression that it has some control over this and that, like Canute, it can somehow control elemental forces (in this particular case, the markets and economic reality).

The EU ministers want a lower rate than the 4% currently being demanded by the bondholders.

Ain't going to happen without enforcement (ie a default).

Negotiations are turning into a clusterfuck!

There will be no deal.

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Greek Haircut Talks Suspended

The Telegraph reports that that talks over a debt deal between lenders and the Greek government were suspended over the weekend, as the representative of bondholders flew out of Athens empty handed.

A spokesman for the IIF said that Mr Dallara had travelled to Paris for a long-standing social arrangement and his departure was "in no way a reflection on the talks". 

LOL:))

No one seriously believes that spin, surely?

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Greek Haircut 70%

Holders of Greek bonds will have to take a 70% haircut, IF a deal is reached.

The crucial word is "IF".

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Same Old Lies - Greece Is Busted Flush

In October 2011 the "leaders" of the Eurozone assured the world that the Greek debt crisis was resolved, and that Greek bondholders had accepted a 50% haircut.

As I noted then:

".. there are some "issues" that may well unravel this sooner than the "leaders" of the Eurozone would like".

What a difference a few months make!

Moving forward to the present day, we see Greek finance minister Evangelos Venizelos has been addressing parliament. Greece failed to reach an agreement with its international creditors on Wednesday.

He is still prattling on about doing a deal with bondholders (the deal that the world was told was finalised last year) and has reiterated that he wants any debt swap with private sector bondholders to be voluntary.

Nonsense:

"The "haircut" is, despite the spin (seemingly, according to the Euro spin machine the "haircut" is voluntary, therefore it is not a default!), a default.

Does this matter?

Yes, it does matter.

By defining it as not a default, the Eurozone has null and voided sovereign hedging via CDS (this has not gone down well with those who hedged against default)."

No one believes the Eurozone "leaders", most especially the Greek "leadership", anymore.

There will be no deal, and Greece will default.

As I noted in October last year, Greece is a busted flush.

PERIOD!

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Greece Takes It To The Wire

Greece has sent senior officials to Washington today for meetings with the International Monetary Fund, as the talks with bondholders over the size and terms of their haircut have stalled.

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