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|User Info||FLASH: Greece Deal Supposedly Made; entered at 2012-02-21 01:35:34|
Registered: 2011-03-16 Pasadena, CA
Marvin, could you please explain to me why the cds will be triggered with this iteration?
What I think is going on is that funding tranches up until now had an increasing percentage of the funds going to French/German banks that owned the Greek bonds, and a decreasing percentage to Greece itself. 19% to Greece in the last funding tranche. There is simply too much debt to be supported by this bailout mechanism.
Why this next one is different: the private bondholders wont get paid off in Euros, but will receive new debt as a payment-in-kind. The present value of the debt results in the haircut.
Also, whats different this time is that debt held by the ECB doesn't receive the haircut.