The Banking and Strategy Initiative

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European Sovereign Debt Crisis: The UK Law Greek Government Bonds issue

Greece is out with the offer, with apparently most hedge funds holding more than EUR 2 bln worth at 20 cents to the Euro holding veto power over the aceptance of the hair cut terms. The EUR 206 bn of bonds are due for conversion and as per the UK Law that the bonds migrate to , it needs 75% of bondholders to agree as per the new Collective Action clauses ( 75% is a minimum for it to be upheld under the new UK law ) The earlier Greek Law bonds are trading at just 20 cents to the dollar and if less than 75% agree, instead of just a default for the 15 $ in cash and 20$ in new bonds to be issued, the conversion would be a non event as the UK Law covenants do require 75% acuiescence. The entire 206 bln is apparently trading at just EUR 41.2 bln and then of this anyone holding EUR 10.3 bln would thus be in a position to turn down the offer for everyone else.

Apparently EUR 29 bln are already UK law bonds but no, it does not make sense that those which would be trading at a min of 30 cents to the Euro or alrdy EUR 9 bln worth as zero hedge mentions would have the same say, because what is going in for conversion is the EUR 206 bln worth and what would be issued is EUR 31 bln worth in Cash for the entire lot trading at just EUR41bln right now and so they can definitely trade above that cash exchange  value plus another EUR 60 bln in face value of new UK law bonds which will trade for another EUR 18 bln worth,, i.e. if converted the package worth EUR 42 blln is going to become EUR 49 bln minimum

As they say, you can do the math!

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This entry was posted on February 24, 2012 by in Financial Markets and tagged , , , , , , , .


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