FRIDAY, 24 FEBRUARY 2012
Europes sleight of hand.
***ISIN for the bonds secretly exchanged with the ECB are GR0108008476 and GR0120005161 ***
The Greek parliament voted yesterday the new PSI/CAC law. It is not a pretty site for investors or the peripheral bond market. There is no more voluntarism. The main points are.
Only bonds that were issued before 31Dec 2011 would be eligible for the exchange. The Greek government would define, probably later today which of these would participate in the exchange. It only refers to the Bonds under Greek law. The rest (around 18billion) would be dealt separately later in April as they already have CACs.
As bond holders submit their bonds they would also vote for the exchange. For the exchange to proceed a 50% is needed of all the outstanding bonds.
Furthermore in order to bind everyone to the exchange, a 66% is needed of those who voted. Thus a minimum 33% of the notional can bind the rest.
The law is treated as “highest public interest” and as such bondholders have no hope of finding justice in Hell.Republic’s courts. That law supersedes everything (Mandatory provisions). According to some legal observers this could be unconstitutional. As the law was passed by a simple majority this argument may gather pace. Changes in the constitution need a supermajority of 3/5.
Making the law a “public interest” also means that European courts have little power to do much.
The vote is not just about introducing the CAC into the bonds but also activating them automatically once the 66% votes for it. In doing so the Hell.Republic is trying to pass the blame with the bondholders for the coercive nature of the restructuring.
So after all the talk of voluntary participation it comes down to a no-ifs and no-buts restructuring. Small retail bondholders are caught in the restructuring and are bound to lose their savings. The Greek government has expressed its willingness to somehow compensate the small retail bondholders but only in Greece. No details have been published on how this can be done.
As for non-domestic retail investors, they would need to lobby their government. For example a German retail investor should ask Mr Wolfgang Schäuble for compensation.
Andreas Koutras: Europes sleight of hand.
