The 80% Cyprus Haircut

As capital controls are about to be put in place, and Cyprus is ring fenced from the rest of the world, it now emerges that the 40% haircut will in fact be around 80%.

This will end badly!

CDS and The "Secret" ISDA Committee

The "secret" committee of the International Swaps and Derivatives Association (ISDA) will meet today, to decide if the Greek haircut constitutes a credit event which would trigger credit default swap contracts (CDS).


Who are on the "secret" committee?

These guys:

ISDA Determinations Committees (effective 30 November 2011)

Americas
Voting Dealers
Bank of America / Merrill Lynch
Barclays
Citibank
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS

Consultative Dealers
BNP Paribas
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
Asia Ex-Japan
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Citibank
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
The Royal Bank of Scotland
UBS
Consultative Dealers
Nomura
The Royal Bank of Scotland
Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
Australia and New Zealand
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS

Consultative Dealers
Nomura
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
EMEA
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Morgan Stanley
Société Générale
UBS
Consultative Dealers
Citibank
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)
Japan
Voting Dealers
Bank of America / Merrill Lynch
Barclays
BNP Paribas
Credit Suisse
Deutsche Bank
Goldman Sachs
JPMorgan Chase Bank, N.A.
Mizuho
Morgan Stanley
UBS

Consultative Dealers
Nomura
The Royal Bank of Scotland

Voting Non-dealers
BlueMountain Capital (Second Term Non-dealer)
Citadel LLC(First Term Non-dealer)
D.E. Shaw Group (First Term Non-dealer)
Elliott Management Corporation (Third Term Non-dealer)
Pacific Investment Management Co., LLC (Second Term Non-dealer)

Greek Problem Sorted - LOL!

Some of the media are happily pumping the Eurozone line that the Greek problem is sorted, and that now the second bailout of Euro130BN has been agreed (after a marathon 13 hour session of finance ministers) we can all move on.

Not quite, aside from the fact that the Greek economy is sunk and that borrowing money to pay off debt will not resolve this problem; the private bondholders (sans ECB, which protected itself by sleight of hand last week) will have to take a NPV haircut of 74%.

Institute for International Finance (IIF) crisis resolution official Jean Lemierre was only told of the size of the haircut this morning.

The "party line" is that the creditors will voluntarily accept his haircut. The reality is that there will be a few who refuse to have their "assets" further written down, as such Greece will have to enforce the Collective Action Clauses (CAC) and force the recalcitrant bondholders to accept the 74% haircut (this of course is a default event).

Aside form that, all Greece has to do is to reduce its debt from 160%to 120.5% of GDP in 2020.

"Easy"!!!!

LOL!

This is not over, by any stretch of the imagination.

Here is the Sustainability Analysis by the Troika dated 15 February (as you can see, this will not work).

Greek Sustainability Proposal