Thursday, March 8, 2012
Greek Bond Deadline
The deadline for the holders of the Greek bonds to submit to the "voluntary" restructuring is the end of the day today. The choices are: accept the swap deal and take a 70% haircut (=accept a reduced principal and super low interest payments through 2020 dropping the PV of the bonds by 70%) or sue the Greek government in a Greek court. If enough creditors accept the deal then it will not be deemed a default and credit default swaps will not be triggered (insurance will not be paid). The analogy would be to an insurer saying that your house burned down but so did your neighbor's so they don't owe you an insurance payout. An interesting interpretation of an insurance contract.