The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
Whether or not this involves a loss for me or is done "at par", I fail to comprehend how this could constitute a "credit event" in the eyes of anyone.
Now, if people perceive the I bought the new bond under duress, maybe they'll call it a default, but they don't have a legal leg to stand on.
This can also be done as a bond swap. I swap my existing bond for a newly issue bond, and I agree with Greece that the bond is worth the same as the old one. Mark-to-market and hold-to-maturity accounting issues galore, as you can imagine. Credit rating agencies have said they would interpret most bond swaps as a credit event. But if you structured it as two bond purchases as above, it wouldn't be.
A "maturity extension" can be seen as a bond swap. I exchange a bond maturing in 5 years for a bond maturing in 10 years. For the same book value, the 10-year bond would have smaller periodic payments, improving Greece's ability to pay. Longer maturities have higher sensitivities to interest rates higher downside risk, and might lose market value quickly. If the maturity extension is at a loss, it would be a credit event if "involuntary", yatta yatta bing bing.
These are all examples of "debt restructurings".
A "default" is a failure to meet obligations as they mature. Evidently, if restructurings are "voluntary" there's no "default".
This has nothing to do with mathematical finance and everything to do with law and politics, evidently, though faulty accounting principles help obfuscate the issues. As does jargon.
"Bondholder bail-in" means forcing bondholders to realise losses on their bond portfolios. A "bond rollover" or "bond swap" or "maturity extension" or "debt restructuring" is a "bail-in" if it involves a loss for the bondholder.
Economics is politics by other means
by Migeru - Jun 15 73 comments
by Frank Schnittger - Jun 17 20 comments
by Katrin - Jun 12 88 comments
by Ted Welch - Jun 19
by Jerome a Paris - Jun 9 68 comments
by DoDo - Jun 9 22 comments
by Zwackus - Jun 11 64 comments
by Metatone - Jun 8 4 comments
by Ted Welch - Jun 19
by Frank Schnittger - Jun 1720 comments
by Migeru - Jun 1573 comments
by Katrin - Jun 1288 comments
by DoDo - Jun 1126 comments
by Zwackus - Jun 1164 comments
by Jerome a Paris - Jun 968 comments
by DoDo - Jun 922 comments
by Metatone - Jun 84 comments
by DoDo - Jun 671 comments
by DoDo - Jun 418 comments
by Ted Welch - Jun 31 comment
by gmoke - Jun 211 comments
by Frank Schnittger - May 3113 comments
by A swedish kind of death - May 3113 comments
by ceebs - May 2927 comments
by ARGeezer - May 2915 comments
by Zwackus - May 271 comment
by DoDo - May 2631 comments
by DoDo - May 2346 comments