Posts tagged 'Seniority'

A Cypriot seniority quirk?

S&P has downgraded (to B from BB) Cyprus, the little island which is facing a great big bank recapitalisation bill from the fallout in Greece. It could well be the biggest ever such bill in history, relative to GDP.* Read more

Accorinti and others v ECB

Big props to Bloomberg for putting this little-known case on the radar (don’t worry, we’ll explain):

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Recaps and the ESM treaty

We missed this on Tuesday — the ESM’s answer to a fairly important ESM legal question.

(KR = Klaus Regling, ESM chief) Read more

Seniority, the SMP, and the OMT

“Was today the day that the Portuguese PSI began?,” Macro Man asks, of the OMT.

They’re noting something curious about ECB seniority in light of Thursday’s revelations about the OMT. The ‘technical features’ confirm that the OMT will receive equal treatment with ordinary bondholders if a eurozone sovereign restructures its debt. But, in the Q&A, Draghi also confirmed that the old SMP bond holdings will remain senior. It will be first in the queue, ahead of bondholders and the OMT. Read more


Here are the full ‘technical features’, which Mario Draghi read out at Thursday’s press conference. Three big things stick out:

- The ECB will apparently make a ‘legal act’ to confirm that its bond holdings under “Outright Monetary Transactions” are pari passu, not senior. Legislation signals a welcome precommitment, but a nasty fudge here: 200 billion euros of bonds held under the SMP (which programme has now been terminated) will not come under the pari passu rule. Read more

As the old SMP passes into history…

A reminder of why the ECB’s promise to “address” seniority in its new bond purchases matters so much (click to enlarge):

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Spreads and that damn seniority

Here’s an interesting exercise in eurozone sovereign credit, courtesy of Francesco Garzarelli of Goldman — click charts to enlarge:

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Spain, a bailout master doc

A little bit of confusion about this one on Thursday.

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Eurozone seniority, needling du jour

A one-liner, but from one preferred creditor to another…

Directors agreed that the ECB will have to continue to play a role in the crisis response, including through liquidity provision and securities purchases. A few Directors also noted that clarifying the seniority status of sovereign debt holdings by the ECB would help address market concerns. Read more

Concessional in Spain

Lend at low rates, for a long term.

It’s one way Spain’s official creditors could believably renounce seniority in the bailout. Concessional loans would make it easier for Spain to refinance its debt stock as a whole, improving bondholder recovery, while recapitalising its banks. ArguablyRead more

A Ulysees pact, on eurozone seniority


Specifically Read more

Spain, seniority, and survivor bias

Update (0445am UK time) — Well, well, well… eurozone leaders did indeed promise not to subordinate Spanish bondholders at the summit, as we assumed they would below. Seniority was “renounced” in the case of Spain.

That phrase suggests a reversion to the original status of official eurozone bilateral and EFSF loans – of being at least pari passu with bondholders. (Though at times the loans have even been subordinated on some points, such as restructuring interest rates. The status is a political football subject to constant change, you could say.) Read more

Four questions and a subordination

1) How do holders of Spanish bonds react to ESM subordination?

The cat’s out of the bag now, isn’t it. On the one hand Spain borrows up to €100bn for the bank recapitalisation which everyone knew was coming, but at a lower rate than everyone had priced into Spanish bond yields. Bond yield relief, maybe. Read more