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The true face of PSI

13 March 2012 / 16:03:01  GRReporter
3065 reads

A headache in the Greek financial circles follows after the big weekend party when the country triumphed because of the super successful, according to the government of Lucas Papademos, completion of the debt haircutting procedure by private investors of Greece. On Tuesday, however, things do not seem as local media tried to present them.
    As if markets are not convinced that even after more than 100 billion euro have been written off Greece will be able to service its debt. The spread-index of securities maturing on 24 February 2023 compared to the respective German securities maturing in 2022 reached 1651 basis points - i.e., the levels of September 2011. The spread-index of 30-year bonds maturing in 2042 compared to the German ones is 1123 basis points. Even countries like Iraq, Pakistan and Venezuela have lower spread-indexes.
    The new Greek bonds are of 21 types, their maturities are between 11 and 30 years and their prices range from 23 to 26.5 euro cents - values ​​slightly higher than those at which they were traded on Friday on the black market. These prices range from 22 to 26 per cent of the net present value. According to financial dealers, these prices comply with the securities of countries that are unable to service their debts. The interest rate stated on the coupon is 2 per cent and the interest rate required by investors was 13.66 per cent for 30-year bonds and 18.26 per cent for 11- year ones. These values ​​are much higher than the usual values for the euro area and even beyond the interest rates on Portuguese bonds, which are expected to be the next to undergo the PSI procedure.
    Analysts forecast a wave of massive sale of Greek government bonds, although they are registered under the British legislation. The big day for the credit default swaps is Monday, 19 March, when an auction will take place and the conditions for their payment will be set depending on the type of their purchase contracts. The date was set by the International Swaps and Derivatives Association that has defined the Greek PSI a credit event. The decision was positively assessed by the German central bank Bundesbank and a member of its management committee, Andreas Dobret, stated that it would have a stabilizing role in the global financial markets. "Nobody should underestimate the negative effect of non-paying such insurances on a market of 32 trillion dollars," he said.
    Eurogroup's insistence yesterday for not compensating individual holders of Greek securities, because it would be an unequal legal treatment of the concept of private investors, was like a cold shower to them. "Individual holders of Greek bonds are suffering a double blow. On the one hand, they are seeing their savings invested in government securities destroyed and on the other, their wages and pensions are reduced," said Yiannis Marinopoulos, president of the association of individual holders of Greek bonds.
    "It is impossible to give an individual a bond maturing in 2042, which in no way corresponds to the duration of his/her life and deprive him/her of the opportunity given to banks and insurance companies to negotiate its terms", said the economist. He noted that banks, insurance funds, large investment funds were able to defend their interests by negotiating with the Greek state, while individuals were deprived of this opportunity. Yiannis Marinopoulos considered the legal claims against the Greek state prepared by several groups of foreign investors fully consistent.
    The German law firm Grouper & Koepke is one of those defending the interests of individuals bound by the collective action clauses to participate in the Greek PSI. They are preparing a lawsuit against the Greek government and banks. The manager of the firm Matthias Grouper reported that so far 200 investors have been willing to bring a lawsuit against the Greek state. These are German as well as Greek wealthy families holding bonds for 100,000 and 400,000 euro and only in one case, for 3 million euro. They could be compensated by Greek state property located on German territory. There are claims against banks for giving misleading advice to clients too.

 

Tags: Greek debtPrivate investorsPSISpread indexCredit default swapsLaw firm Grouper & Koepke
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