Joseph CotterillRead Biography
Following the results of the Asset Quality Review and Stress Tests before the end of the year, the bail in instrument will apply for senior debt bondholders whereas bail in of depositors is excluded. – Eurogroup statement on Greece, August 14th Which ‘instrument’ might that be for wiping the senior bonds of under-capitalised Greek banks?
Another sovereign issuer started defaulting on its debt on Monday — treading a path well-worn by governments who run out of money. This is Puerto Rico and the US muni market however, so the actual statement from its Government Development Bank, on missing a Public Finance Corporation bond payment, might make it appear as if things are different this time:
Here is another very strange, and short, document. Click to read. It’s an update to the Greek debt sustainability analysis by IMF staff — yes one of those analyses again — which was originally published just before Greece’s July 5th referendum.
At length. Because haven’t you heard? Germany is a hypocritical creditor. It won’t give Greece the debt relief which it received itself in the 1950s. Thomas Piketty said it. So it must be true:
Here is an earnest, but very strange, document. Click to read. It’s a Greek debt sustainability analysis by IMF staff. Yes, one of those analyses. A preliminary one, but in many ways the DSA to end all DSAs.
This belief — that an implicit official sector guarantee has quietly settled over every sovereign debt instrument issued by every geopolitically significant country on the planet — is a fallacy. The moral hazard implications of allowing this idea to prosper are staggering. More importantly, the official sector lacks the resources to make good on such an implicit guarantee, even if it wanted to do so. – Lee Buchheit, ‘Sovereign fragility’, 2014 Coming home to roost now though, isn’t it?
She’s a little busy with Greece at the moment. But just under two weeks after Christine Lagarde read the IMF equivalent of the riot act to Ukraine’s biggest bondholders over its debt restructuring… They’ve responded. See below for the full open letter from Ukraine’s creditor committee on Wednesday:
The governments change, the debts change. The rhetoric, on the other hand… In light of the Greek prime minister’s recent ‘humiliation’ speech and the rather heated reaction it’s had among official creditors (and private bondholders) – we thought we heard some historical echoes. So we took a quick look through the archives.
Back in April, five leading owners of Ukrainian bonds formed a committee to negotiate a restructuring with their debtor – and avoid losing money on their approximately $10bn principal in the process. Now count the names in this release on Monday…
Are you an EM fund manager? Do you live in London or New York? Were you by any chance offered some of the $1.4bn of Bonar 2024 bonds issued by Argentina on Wednesday, bought by Deutsche Bank and BBVA on Thursday, and settling this Friday? Or maybe you’d like to buy these bonds in the near future. Then congratulations. You might well also be buying yourself a ticket to the next exciting stage of the pari passu saga. PS: this may now involve the holdouts personally hunting you down.
There have been a few doubts lately about whether Ukraine was going to include that $3bn Russian bond, issued in 2013 and maturing this year, in its debt renegotiation with private creditors. Well, over to a resolution by the embattled country’s Cabinet of Ministers…
The Russia problem aside, Ukraine’s other big task in its $15bn debt restructuring will simply be to convince private bondholders that it’s a deal worth taking. One way to do that is for bondholders to realise they are dealing with a government burdened with the costs of war and as it happens, increasingly absorbed in an intense lustration campaign. But some of them (quite possibly one that lives in San Mateo, CA) could have holdings large enough to block a bondholder vote. So, even if Natalie Jaresko, the Ukrainian finance minister, does like to quote Margaret Thatcher about there being no alternative… the new bond terms will need to justify taking a massive haircut compared to holding out for full payment. Another way to do it? Note how ripe for abuse the old bond terms are. _________________ When Lee Buchheit, Ignacio Tirado and Mitu Gulati were looking deep within the innards of Cypriot government bonds just over two years ago — shortly before the climax of the island’s debt crisis — they found something exciting.
Well, shouldn’t buyout firms be a little perturbed by things like this? PITTSBURGH and NORTHFIELD, Ill., March 25, 2015 /PRNewswire/ — H.J. Heinz Company and Kraft Foods Group, Inc. (NASDAQ: KRFT) today announced that they have entered into a definitive merger agreement to create The Kraft Heinz Company, forming the third largest food and beverage company in North America with an unparalleled portfolio of iconic brands…
This won’t be getting any UK Budget financial headlines. (Between Help to Buysa, more bank levy twiddling, and even Northern Rock’s £13bn Granite securitisation going on sale.) On the other hand, it’s been quite a year for financial sanctions — those against Russia having been some of the most complicated ever.
That’s the gist of the latest from Judge Thomas P. Griesa… On Wednesday the District Court judge ordered Deutsche and JPMorgan to turf over documents on the “flow of funds” relating to an unofficial, $2bn sale they were arranging of US dollar-denominated — although not US-law — bonds (Bonars) issued by Argentina.
One may think that this retreat from game theory is motivated by some radical-left agenda. Not so. The major influence here is Immanuel Kant, the German philosopher who taught us that the rational and the free escape the empire of expediency by doing what is right. – Yanis Varoufakis, ‘No Time for Games in Europe’, NY Times
Q. You are a foreign judge being pulled into one of the longest, biggest, stupidest sovereign debt cases in history, one which is presently in limbo in a US court. The debtor has become distracted by a political nervous breakdown at home and may have taken leave of reality altogether. The creditors can’t stand each other, and no one has been getting any money for months, because of the effects of a single bond clause drafted over two decades ago. How do you proceed? A. Politely. Click below for the attempt of Mr Justice David Richards of the High Court of England and Wales: