Well its 3AM in Brussels, and Reuters has ran the headline and story that a deal has been reached with the bailout at €130 billion and the goal of getting Greece to reach 121% of debt to GDP in 2020. Pretty close to what was originally intended.
UPDATE (11:50 PM ET) : Here is the full Eurogroup statement
The shortfall coming into the meeting revolved around the bailout cost being €136 billion and not the €130 billion agreed to in October. It seems a deal has been struck to force private bondholders to accept notional losses on their bonds of 53.5% compared to the originally reported 50%, and implies a bigger writedown than €100 billion that has been reported for weeks. That so far would be the big takeaway from today’s developments and signals that Euro-zone finance ministers have wrung out some further concessions from private bondholders.
The ECB is also being reported as willing to give up profits to help ease Greek debt load.
From FT: “The European Central Bank will pass up profits it has made from buying Greek bonds over the past two years under its Securities Market Programme in an effort to lighten Athens’ debt burden, a senior euro zone official told Reuters on Tuesday.”
What percentage of bondholders that will be holdouts to the deal will have to be revealed at which point Greece will retroactively put in CAC to force holdouts to conform to the terms agreed to voluntary by at least 70% of bondholders. This step would be followed with credit rating agencies labeling Greece in default, but should not trigger a “credit event” which would cause payout of credit default swaps.
The PSI will proceed with a bond exchange, with private bondholders swapping out their current Greek bond holdings with €30 billion in EFSF bonds and around €70 billion of new long term bonds. Those figures are coming from old expectation of 50% notional value writedown and therefore should be smaller than €100 billion.
UPDATE #2 (12:43 AM ET): The ball is now in the court of private bondholders, as German finance minister Wolfgang Schauble left with this caveat
From FT: “”It’s a result that can be justified and that creates the preconditions to get Greece onto a sustainable return to economic health if the swap deal with private creditors is successful. We didn’t make it easy on ourselves. We insisted that the parameters of debt sustainability of 120 pct of GDP will be maintained just like the 130 billion as an upper limit for the second Greek programme…All of that now depends on the reaction from the private sector and besides, it’s all conditional on Greece fulfilling the prior actions.””
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