S&P cuts Greece's credit rating to SD - Selective Default - from  CC following the country's...


S&P cuts Greece's credit rating to SD - Selective Default - from  CC following the country's insertion of retroactive collective action clauses into its debt. "The effect of a CAC is to bind all bondholders of a particular series to amended bond payment terms ... (it) materially changes the original terms of the affected debt."
From other sites
Comments (30)
  • youngman442002
    , contributor
    Comments (5123) | Send Message
     
    Well what do you know.....finally.........
    27 Feb 2012, 04:38 PM Reply Like
  • johnybutts
    , contributor
    Comments (67) | Send Message
     
    Are CDS triggered?
    27 Feb 2012, 04:40 PM Reply Like
  • bbro
    , contributor
    Comments (11216) | Send Message
     
    Greece's 2 year was 231% on Friday..it already was in default
    27 Feb 2012, 04:42 PM Reply Like
  • youngman442002
    , contributor
    Comments (5123) | Send Message
     
    230 must be the trigger point for S&P...lol
    27 Feb 2012, 04:45 PM Reply Like
  • sr1977
    , contributor
    Comments (365) | Send Message
     
    No CDS trigger unless the bond swap participation rate is below 75% - at which point the selective default changes to "Default".

     

    The use of retroactive CAC's on their bonds as (sole) cause for a credit event/ CDS trigger gets decided on Wendsday by the ISDA. They are not likely to side in favor of this being viewed as a credit event...

     

    The ISDA is comprised of some of the same bankers that wrote the CDS's on Greek bonds and they would stand to loose if it was a credit event.

     

    You couldn't make this stuff up if you tried.
    27 Feb 2012, 04:53 PM Reply Like
  • WMARKW
    , contributor
    Comments (10788) | Send Message
     
    They say that incest generally produces lower IQ's over time.
    27 Feb 2012, 06:30 PM Reply Like
  • SA reader
    , contributor
    Comments (176) | Send Message
     
    Yes, but if people lose faith in CDS, they have a MUCH bigger problems and will lose MUCH more business.
    28 Feb 2012, 02:35 AM Reply Like
  • ggggg
    , contributor
    Comments (22) | Send Message
     
    Well, if there's anyone important that's still unhappy., it just means someone forgot to pay a bribe... Time to print more money!
    27 Feb 2012, 05:32 PM Reply Like
  • Eighthman
    , contributor
    Comments (363) | Send Message
     
    So, the guy who owes the money decides if he really owes it?
    27 Feb 2012, 07:17 PM Reply Like
  • thechaser
    , contributor
    Comments (761) | Send Message
     
    hey sr1977; http://www.isda.org says Determinations Committee "will decide whether to accept the question for deliberation or reject it"

     

    you are right; this stuff cannot be made up; in other words, no indication of when they will or will not MAKE a decision on whether unilateral changes to monetary contracts depriving the owners of some 80% more or less is a default, just that they may think about it!!

     

    can you believe this house of cards mickey mouse BS and the various commenters all jumping on the bandwagon of 'oh yeah, the market is great and buffet is god and of course we all knew just 8 weeks ago that we would have 170 point SnP500 rally'

     

    even though marc faber is one of the inside track crowd, he got it right when he said "this is all going to end badly"

     

    i have been a constant bull because of world population growth and the perservering nature of mankind , but jesus, like sr1977 said, you could not make this crap up, it is absolutely beyond comprehension when you see the kind of manipulative pure BS as this morning's market

     

    TPTB are scared, really scared because the wheels are coming off of this $50 trillion global disaster and even with no interest, just the amortization of $50 trillion insures its non repayment
    27 Feb 2012, 07:19 PM Reply Like
  • rpgpa
    , contributor
    Comments (65) | Send Message
     
    bravo chaser!! this is comical manipulation. even in the dot com era there was a correction here and there and real people trading. they dont even try to hide how rigged this is. its not even a market anymore
    28 Feb 2012, 08:21 AM Reply Like
  • ggggg
    , contributor
    Comments (22) | Send Message
     
    With all 5 major Central Banks actively printing; I think the real question is as we print the $50 trillion needed to avoid collapse by deflation, are we also printing it slowly enough to avoid collapse by inflation...
    29 Feb 2012, 08:30 AM Reply Like
  • Bill S. Friend
    , contributor
    Comments (715) | Send Message
     
    Somebody is calling it default?
    27 Feb 2012, 08:30 PM Reply Like
  • sr1977
    , contributor
    Comments (365) | Send Message
     
    Understand that the CAC's probably won't be invoked if there is greater than 95% participation in the swap. The remaining 5% would most likely be paid at par (made whole) and the swap would go through without a credit event.

     

    A 75-95% participation rate would probably result in the CAC's being invoked on the holdouts, and from there it gets messy and complicated as some Greek bonds were issued in London and do not fall under Greek law. CAC's on these English Law bonds are technically invalid. There would most likely be some sort of a credit event if the CAC's are invoked. Punitive CAC's on English law bonds would also likely result in claw-back law suits.

     

    The ISDA is probably thinking that since the CAC's have not yet been invoked, then it is not yet a credit event. In as much as the invoking of the CAC's will most likely result in the S&P down grading Greece to Default from selective default anyway (and that would be a credit event), it does not really matter what the ISDA rules tomorrow. Although one could certainly argue that the mere presence of CAC's (invoked or not) are somewhat coercive to bond holders. Because with CAC's Greece is almost saying "participate in the swap or you might get an even bigger haircut".
    27 Feb 2012, 08:31 PM Reply Like
  • JohnLocke
    , contributor
    Comments (383) | Send Message
     
    Is this a moot point if the Hedge funds manage to purchase enough debt to prevent enough bonds from being tendered thus allowing the Greeks to not initiate the latest plan.

     

    Could the non sovereign holders of Greek debt force CDS?
    27 Feb 2012, 09:26 PM Reply Like
  • Doyle3000
    , contributor
    Comments (1952) | Send Message
     
    now that is a well informed post. you should write your own articles.
    27 Feb 2012, 10:15 PM Reply Like
  • JohnLocke
    , contributor
    Comments (383) | Send Message
     
    Just trying to learn from someone (sr1977) who appears to be well informed ...

     

    No articles for me as I'm a pessimist who borders on illiterate most of the time...lol
    27 Feb 2012, 10:28 PM Reply Like
  • Bill S. Friend
    , contributor
    Comments (715) | Send Message
     
    "Greece becomes 1st EU state rated in default " implying there will be more to follow, Greece is just first. How American markets react will be interesting, any outflows from EU investors probably already occurred. Rational thinking would indicate a bloodbath tomorrow, then a readjustment Wednesday, (if rational thinking comes into play). Perhaps the HFT's and shorts will take us into Dow 6600 again, Im glad to be 100% cash.
    27 Feb 2012, 08:53 PM Reply Like
  • Moon Kil Woong
    , contributor
    Comments (13372) | Send Message
     
    The participation rate better be over 75% because its better to own something that's worth something than a lot of something that's worth nothing. If hedge funds want to hold out let them sink to the bottom of the Mediterranean.
    27 Feb 2012, 10:16 PM Reply Like
  • bearfund
    , contributor
    Comments (1550) | Send Message
     
    You mean, if they want to hold out for what's rightfully theirs? They should, and if Greece won't pay it, they should show up with an army and sack Athens. Anyone opting for the exchange is a sucker, and if I were a shareholder in a corporation that were doing so, I would sue.
    27 Feb 2012, 10:44 PM Reply Like
  • bob adamson
    , contributor
    Comments (4560) | Send Message
     
    We can criticize the haircut and bailout packages that Greece has negotiated with its EU partners, the ECB and the IMF as not addressing the underlying weaknesses of the Greek economy (and therefore the Greek fiscal situation) within the EU context but these packages do achieve an orderly default of unsustainable Greek sovereign debt without triggering
    (a) CDSs,
    (b) banking or financial system insolvency or
    (c) defaults of the sovereign debt of other EU State.

     

    This is a good beginning but it needs to be followed by measures to enhance the fiscal and democratic institutions at the centre of the EU project to match the needs of the quasi-federal State the EU has become (at least collectively for those member States that each have as their national currency the Euro).
    27 Feb 2012, 10:38 PM Reply Like
  • SA reader
    , contributor
    Comments (176) | Send Message
     
    You are absolutely crazy if you think 95% of people will tender their bonds and thus prevent CDS from triggering due to the CAC. So you are wrong. CDS will trigger or even worse, Greece will just fully default if under 75% (and that is even likely).
    28 Feb 2012, 02:39 AM Reply Like
  • ggggg
    , contributor
    Comments (22) | Send Message
     
    Yes It's crazy! But what do you think all the negotiations have been about. Go look back at how much money is allocated to "sweeteners". This is the new label for what used to be called bribes and kickbacks before corruption was legal. The goal of all of this is to transfer the losses from the private sector to the public sector before it all comes apart. Last October, I would have said: Impossible! But now, it looks to me like they actually may be able to pull it off.
    28 Feb 2012, 08:27 AM Reply Like
  • bob adamson
    , contributor
    Comments (4560) | Send Message
     
    SA -

     

    Two points:

     

    I believe that 75% is the take-up rate that triggers the haircut package under the legislation that the Greek Parliament just enacted as part of the package agreed upon the weekend before last with the EU finance Ministers.

     

    Broadly speaking (there are some further exceptions) the private sector holders of Greek sovereign debt fall into two camps. First are banks in EU countries and these will go along because:
    (a) even if they stand to benefit up front more if their CDS were triggered, the economic damage resulting from a formal default in the economies in which they do the most business would cause these banks losses that would more than offset those benefits, and
    (b) the ECB, the central banks within their own home EU State and their national governments have undertaken to backstop the continued liquidity of these banks.

     

    The second class of Greek sovereign debt private holders are hedge funds. Many of these bought Greek debt at deeply discounted prices and therefore their losses are correspondingly less. Further, the aforesaid Greek legislation, by deeming the restructuring of Greek debt not to be a default provided that 75% of the holders thereof accept the restructuring plan, undercuts the basis for these hedge funds to claim provided that the 75% threshold is met (which will likely be the case because the EU based banks will all participate).
    28 Feb 2012, 11:21 AM Reply Like
  • JohnLocke
    , contributor
    Comments (383) | Send Message
     
    So if the debt swap does happen...

     

    What exactly is a GDP linked security?

     

    No growth = Interest free loans (?)
    27 Feb 2012, 10:53 PM Reply Like
  • Cynical One
    , contributor
    Comment (1) | Send Message
     
    What is the participation rate? And, this is in regards to S&P rules, right? Not the ISDA's rules/definitions?

     

    Do you know all the participants/members of the ISDA? Are there not previously defined rules for determining whether the CDS's are triggered?

     

    Agreed that it is highly unlikely that anybody is willing to make the decision to trigger the CDS's. The result of such an event has been behind most everything that has happened in the global financial world the last several years. The powers-that-be know exactly what they're doing and why.
    28 Feb 2012, 12:47 AM Reply Like
  • Tack
    , contributor
    Comments (16267) | Send Message
     
    And, look at the futures. Absolutely nothing happening.

     

    Was the wait worth it?
    28 Feb 2012, 01:17 AM Reply Like
  • bearfund
    , contributor
    Comments (1550) | Send Message
     
    Of course the world ended; this is just a postapocalyptic nightmare world that happens to resemble in every other way a world in which Greece's spending and debt were at healthy levels and a default was never considered possible. This must be the case, because for years now we've been hearing nonstop that any kind of default in the eurozone would not only rend the zone, eliminate the common currency from circulation, and plunge Europe into 40 years of darkness, it would also bankrupt the entire US financial system, render it impossible for even healthy companies to make payroll, cause farmers to forget how to grow food, and kick your dog in the ribs. Since there's no way that so many self-appointed geniuses could ever be wrong, the only possible explanation is that all of those things already happened and we've collectively suppressed the memories. Our lack of aging can easily be explained by a time warp.

     

    The alternative explanation, that a tiny country with a GDP accounting for about 0.6% of world output (which itself consists mostly of government borrowing and boondoggles rather than production of in-demand goods and services) and less than 1% of global sovereign debt could impose a 70% haircut on less than half of that debt with no meaningful repercussions on anyone not holding it, is just laughably implausible. While I've been advocating that view for a long time, I was obviously wrong.
    28 Feb 2012, 11:07 AM Reply Like
  • Joe Morgan
    , contributor
    Comments (1608) | Send Message
     
    Tack, but...but....Zerohedge, told me this was scary! A default!....

     

    Unfortunately a lot of people were caught in the hysteria and missed one of the greatest rallies in our history. Small caps and medium caps doubling in just 5 months.
    28 Feb 2012, 07:22 AM Reply Like
  • JohnLocke
    , contributor
    Comments (383) | Send Message
     
    Because doubling in value in five months is a realistic expectation based on a healthy robust business environment where people are employed and spending money?

     

    Or (IMO) more likely that the market is disconnected from reality and fundamentals and worse subject to artificial manipulation via HFT, Blackpools and Front Running.
    28 Feb 2012, 08:47 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs