Sat, Sep 20, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Riskdata estimates the price of the new Greek-Bond portfolio to be Eur211 for each Eur1000 of initial face value

Wednesday, April 25, 2012
Opalesque Industry Update - Investors' and Risk Managers' Perspective: Riskdata estimates the price of the new Greek-Bond portfolio to be 211€ for each 1000€ of initial face value. The New Greek Bond Portfolio Duration is calculated close to 10 years, regardless of the original bond maturities.

Riskdata analyzes what Bond Holders receive after the First Eurozone Default in terms of Greek Write-Down, Portfolio Duration and CDS Credit Event Triggering and concludes the new portfolio duration to be independent of the original portfolio, with valuation equal to roughly one fifth of the original face value.

According to the terms of the Greek PSI agreement for debt restructuring, holders of sovereign Greek bonds will be delivered a portfolio of EFSF "PSI notes" and New Greek Bonds. In the context of the European debt crisis, Riskdata estimates the price of the new portfolio to be 211€ for each 1000€ of initial face value, whatever the particular bond being held, 150€ (71%) of EFSF note, 61€ (29%) of New Greek Bonds, the GDP-linked securities counting for less than 0.2%. The combined Duration of the two EFSF notes is 1.5, while that of the New Greek Bonds is close to 10 years. The first phase of the swap, involving bonds issued under Greek law, was completed on March 12, cancelling more than 94.8 billion Euros in near and mid-term debt. The deadline for Greek Debt securities issued under foreign law has been extended and re-extended to April 20, but the Greek Ministry of Finance has warned that investors who refused voluntary exchange would be forced to accept the same swap terms.

Moreover the International Swaps and Derivatives Association (ISDA), which manages Credit Default Swap (CDS) rules, has declared that a Restructuring Credit Event has occurred with respect to the Greek Private Sector Involvement (PSI).

A CDS auction on Mar 19, 2012 has valued sovereign Greek bonds at 21.5% of their face value for the purpose of CDS settlement.

With the European Crisis in mind, a sufficient proportion of bond holders has accepted the swap provisions that will ultimately become mandatory for all investors.

Moreover, whatever the term structure of previous bonds, they are being uniformly exchanged for a set of securities with clearly pre-defined characteristics. Specifically, 1000€ face value of old sovereign Greek bonds is replaced by a new basket with a combined face value of 465€: 150€ for EFSF notes (equally split between 1-year and 2-years) and 315€ for a set of New Greek Bonds, producing as a whole an amortizing structure from 11 years to 30 years. The GDP-linked securities represent a small coupon enhancement in case the Greek GDP meets certain conditions of level and growth. They have little impact on either price and or risk profile of the combined structure. Altogether, the portfolio of New Greek Bonds has an average duration of slightly under 10-years. In terms of market value as of today, while the EFSF notes are approximately equal to their face value, the portfolio of New Greek Bonds is worth 61€ and the GDP-linked securities amount to a fraction of a Euro (exact price depending on Greek growth assumptions), making the whole structure slightly above 211€.

(press release)

Headquartered in Paris, France with regional offices in New York, London and Moscow, Riskdata services over one hundred top financial and investment institutions worldwide. Riskdata offers a comprehensive suite of solutions for Asset Managers and Institutional Investors, covering all risk-management related needs, including quantitative asset screening, pretrade simulation, portfolio construction, as well as regulatory compliance and reporting. Riskdata products combine global cross-asset-class pre-calculated data, with light and easy-tointegrate software. All Riskdata models fully meet the most challenging regulatory standards. www.riskdata.com

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SEC charges 19 investment firms and one trader for breach of Rule 105[more]

    Benedicte Gravrand, Opalesque Geneva: The Securities and Exchange Commission (SEC) started a push to enhance the enforcement of Rule 105 of Regulation M last year to uncover hedge funds and private equity firms that have illegally participated in an offering of a stock after short selling it duri

  2. Fund managers, bullish on Europe, anticipate monetary policy separation of Fed and ECB[more]

    Komfie Manalo, Opalesque Asia: At least 202 fund managers with $556bn of assets under management said that while the European Central Bank (ECB) has eased its monetary policy that sent sentiments towards Europe to pick up, the Fed is expected to hike its rate in the spring of 2015. Investor

  3. Institutions - North Carolina workers call on state pension to dump up to $6bn in hedge funds, UK pension fund criticizes hedge fund fees[more]

    North Carolina workers call on state pension to dump up to $6bn in hedge funds From Forbes.com: The State Employees Association of North Carolina this afternoon called on state Treasurer Janet Cowell to withdraw all investments in hedge funds, which appear to amount to approximately $6 b

  4. News Briefs - Limited partners of investment managers may be subject to self-employment taxes, Just one week left until NYC's Rocktoberfest[more]

    Limited partners of investment managers may be subject to self-employment taxes On September 5, 2014, the Internal Revenue Service (“IRS”) issued Chief Counsel Advice 201436049, concluding that members of an investment manager were subject to self-employment taxes with respect to their e

  5. Institutions - Adviser's faith in hedge funds unshaken by CalPERS' move Advisers weigh in on CalPERS’ decision, Gina Raimondo sees no reason to follow California’s lead, exit hedge funds, Danish pension funds step up 'alternative investments'[more]

    Adviser's faith in hedge funds unshaken by CalPERS' move From WSJ.com: Financial advisers who use hedge funds in their clients' portfolios say they aren't rethinking that approach after a huge California pension fund announced plans to exit the hedge-fund market. The decision by the Cali