Via WSJ (article here):
Greece will activate legal measures designed to force private holders of bonds governed by Greek law to accept writedowns on their debt, the head of the euro zone's finance ministers said Friday.
"The Eurogroup was informed that Greece will activate the Collective Action Clauses applicable to bonds governed by Greek law," Jean-Claude Juncker said.
The Greek government said Friday it had persuaded enough of its private-sector creditors to proceed with the largest restructuring of government debt in history. It reported an 83% pickup of its debt restructuring offer, a figure that would rise to 95.7% after the activation of collective-action clauses forcing the remainder to follow suit.
Private bond holders will tender their bonds for new ones at less than half their value as part of a massive debt exchange aimed at preventing a disorderly default.
Juncker said the currency bloc's finance ministers now believe the right conditions are in place to approve Greece's second bailout program.
"The Eurogroup considers that the necessary conditions are in place to launch the relevant national procedures required for the final approval of the euro area's contribution to the financing of the second Greek adjustment programme," Juncker said after a conference call of euro-zone finance ministers.
Ok, that means two things: (1) They will get their loans in order to keep going and (2) CDS will trigger. All in all not a bad day. They get loans and we will have to see the fallout of the CDS trigger. I don't think it will be smooth sailing, nor is it the end of the Greek/PIIGS saga.
From there, lets go to Reuters (article here):
Greece's austerity and reform programme demanded by the IMF and the EU means that its debt burden in 2020 should be proportionately similar to that at the moment of Portugal.
This means yields on Greek and Portuguese bonds should be similar, provided investors believe Athens will meet its debt target. This was not the case on the "grey market", where traders quote prices before a security is issued, with yields at 15-21 percent, far above Portuguese levels around 11-14 percent.
"One would expect the yields on the new Greek bonds to be close to Portugal's levels, where the debt-to-GDP ratio is about 116 percent," one international bond dealer said on Friday.
"But ... the market is pricing a high risk premium, which reflects uncertainty over upcoming elections in Greece and reform implementation risk," the dealer added, saying yields would probably remain around current levels for a few months.
So the deal got done, that doesn't mean traders/investors think it will work. Again, they may have restructured their debt, but they still have to follow through with austerity measures and in a nation where the national pasttime is not baseball, but tax evasion, I am not convinced we will see the follow through required to put the country on a sound financial footing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
