Mish….cake for hedge funds holding Greek debt… Armstrong says there’s ‘No Incentive’ to agree to Greek swap

Some headlines first:

  1. Nearly 1,700 Layoff Warnings Issued by City Schools (San Diego)
  2. Hamtramck, Wayne Co. face rising struggles making payroll
  3. With a Pension Shortfall, Companies Want to Kick in Even Less
  4. California Pension May Lower Assumed Return for First Time Since Recession
  5. Spanish farmers faced with ruinous tax hikes
  6. Hospitals face $170m hit from sick carbon tax (Victoria)


…………………Athens’ Pitifully Hollow Warning to Bond Holdouts; Self-Serving, Misguided Hype by IIF on “Implications of a Disorderly Greek Default and Euro Exit” (Mish)….”Greece has threatened to default on any of its bondholders who do not take part in this week’s €206bn debt restructuring, raising the pressure on potential holdouts.

The threat is aimed in particular at the 14 per cent of investors who own Greek bonds issued under international law. The remaining 86 per cent, who own bonds covered by Greek law, were warned in the same statement that Greece would use so-called collective action clauses to make any deal binding on any holdouts”

Mish’s comment: “Pitiful Threat

This pitiful threat demonizing evil hedge funds will prove to be as effective as a parent telling a child, “If you don’t clean up your room, I will give you piece of cake”.

The hedge funds want a default. They are the ones covered with CDS contracts that will pay them in case of default. Those covered by CDS contracts have no incentive to agree to deals and threats to blow the entire deal sky high is exactly what most of the holdouts want to hear”


Other updates:

Four Greek pension funds refuse to join debt swap-official

The pension funds have come under pressure from workers’ unions worried the writedown on Greek debt holdings will affect the viability of their funds. About eight or nine funds have agreed to take part but pension funds for journalists, police, the self-employed and hotel workers – which hold Greek debt worth 2 billion euros – have refused, the official said.

NY county declares emergency, could roil municipal bond market

The top government official in New York’s Suffolk County said on Tuesday he would declare a fiscal emergency, a move that could roil the $3.7 trillion municipal bond market. County Executive Steve Bellone said he was taking the action after an independent task force found it would have a deficit of $530 million in a three-year period.

Article Continues Below

Investors holding $106 billion in Greek debt agree to participate in bond swap

Private investors holding some €95 billion ($125 billion) in Greek bonds said Wednesday that they will participate in a massive debt relief for the struggling country, bringing Athens closer to avoiding default…….Investors holding a total of €206 billion ($271 billion) in Greek bonds have until Thursday evening to decide whether they want to participate in the bond swap. Athens needs to reach a participation rate of at least 66.7 percent of investors holding bonds issued under Greek law to force the deal onto holdouts.

Armstrong Says There’s ‘No Incentive’ to Agree to Greek Swap

Armstrong Investment Managers LLP, a London-based money manager that oversees about $350 million, said it won’t participate in Greece’s debt swap because it may recoup more money by holding out. There’s no incentive to agree to the debt exchange because investors are likely to be swept in anyway by so-called collective action clauses, Managing Director Patrick Armstrong said in an interview with Bloomberg Television today. Holders of Greek bonds that mature this month have a “small window” of getting paid out at face value if they hold out, he said.

Philadelphia school deficit could hit $400 million, official says

The Philadelphia School District could face a budget shortfall of as much as $400 million in the next fiscal year, a top district official said Tuesday. Or it could be $145 million – “still very big” but more manageable, said Thomas E. Knudsen, the district’s chief recovery officer.

States facing ‘sleeping cancer’ in 96% unfunded retiree benefits

The near-failure by U.S. states to fund rising retiree health-care costs for millions of government workers threatens to produce budget crises similar to the one that pushed Stockton, Calif., to take a step toward bankruptcy last week. States haven’t financed almost 96 percent of the $627.4 billion they were projected to owe for future retiree benefits in 2010, according to Bloomberg Rankings data. The estimated deficit grew from about 95 percent in 2009 as governors coped with lower general-fund revenue and rising demand for services following the longest recession since the Great Depression.

Creditors join forces to challenge Greek bond swap

Investors in a Swiss-law governed Greek government bond have teamed up to challenge the terms of Athens’ proposed bond swap, highlighting the wave of litigation the country could face in trying to cut its debt

And the losers from Greek CDS contracts are… German (Ambrose Evans-Pritchard)


– Sax


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