So it could be that the creditors have agreed to swap their bonds for 30 year bonds with ‘half their face value’ but maybe also with about equal economic value, which can in theory be done if the coupon and quality of the new bonds is high enough.

But, again, seven months of negotiations shows it’s not all that easy to come to agreement, and also that for reasons probably not entirely disclosed the bond holders have substantial bargaining power.

Greece hopes for debt swap deal by end of week

Jan 26 (AP) — Greece is aiming to complete negotiations on its debt swap deal by the end of the week, the government’s spokesman said Wednesday, adding that the talks were at their “most delicate phase.” Charles Dallara, head of the Institute of International Finance will head back to Athens on Thursday for the negotiations on a bond swap, known as the Private Sector Involvement. Athens is trying to get its private creditors to swap their Greek government bonds for new ones with half their face value, thereby slicing some euro100 billion ($130 billion) off its debt. The new bonds would also push the repayment deadlines 20 to 30 years into the future.

8 Responses

      1. @WARREN MOSLER,

        I think not bargaining power, per se, but a pretty good BATNA: if they don’t agree, and force a real default, they have their CDSes that should pay off, as opposed to having to forgo the CDS insurance if they reach an agreement.

      2. @WARREN MOSLER,
        I am curious to see (if at all we get to know) which participation rate they accumulated after 7 months bargaining and increasing haircuts. As far as I understand they go to add CACs to force those that did not agree, this will happen retrospectively by way of unilateral change in Greek law.
        And then to realize that to make them Mosler bonds they cannot unilaterally.

      3. I’m thinking in a default the bondholders may have some residual ability to attach greek govt assets?
        still pondering how they get their bargaining power

  1. The bargaining power of bonderholders is called BRIBERY. Life long executive jobs at Goldman Sachs with huge golden parachutes written into the contract plus old fashioned suitcases of money and hookers.

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