The Eight Hundred Pound Greek Gorilla

The United States is in the exact same position because none of our unfunded liabilities are included in national debt calculations. Every lie that has been told is now stepping forward to be revealed as such and they will show no mercy as the truth exerts its long-denied existence. -- MCR

The Eight Hundred Pound Greek Gorilla Enters The Room

Zero Hedge,

10  March, 2012

“After an increase of only 3% in the second half of 2010, total notional amounts outstanding of over-the-counter (OTC) derivatives rose by 18% in the first half of 2011, reaching $708 trillion by the end of June 2011. Notional amounts outstanding of credit default swaps (CDS) grew by 8%, while outstanding equity-linked contracts went up by 21%.”

                          -The Bank for International Settlements, Nov. 2011

The Rub

We all have been staring at the Greek sovereign debt and then the Greek CDS contracts. It was 1/13/10 when I first predicted that Greece would default and what a long and winding road it has been; similar to some hallucinogenic experience manufactured by Timothy Leary. 

Sometime soon, given what has taken place, I expect the ratings agencies to place Greece in “Default” and with their banks following. The markets are “Ho-Humming” and the conversations revolves around “Net” CDS exposure and the write-downs that have already taken place at the European banks. Please recall AIG and what happened with Lehman and what do we find this morning; KA Finanz, the Austrian bad bank, faces $1.32 billion in losses due to their exposure to the Greek CDS contracts according to a Bloomberg article. 

So now we will wait and see who else is on the hook, who may be seriously impaired, because the Gross number of about $79 billion for Greek CDS is about to enter center stage.

It Gets Far Worse

I hold up my hand, “One moment please” as I introduce you to the 800 pound Greek Gorilla that is about to enter the room. 

Allow me to now present to you the “OTHER” Greek debt that is outstanding and will have to be accounted for as the country defaults. Detailed below are some of the “OTHER” sovereign obligations of the Greek government which have now been submitted to the ISDA and I list some of them below. 

You will note that there are bank bonds, Hellenic Railway bonds, Urban Transportation bonds et al that are guaranteed by Greece. You will also note that there are bonds tied to Inflation, Floating Rate Notes, Asset-Backed securities and a whole mélange of other structured products with a Greek sovereign guarantee. 

What we all thought was fact is now clearly fiction and default will now bring “Acceleration” one could reasonably bet in all kinds of these securitizations and in all kinds of currencies.  

This could come from the ratings agencies placing Greece in “Default” or it could come from the CDS contracts being triggered depending upon each indenture and you will also note that a great many of these off balance sheet securitizations are governed by English Law and not Greek Law. 

You may also wish to consider the fallout to the banking system as the lead managers of all of these deals could find themselves behind the eight ball as various clauses trigger and as the holders of these securitizations line up at the judicial bench [ZH note: there is a reason why Allen & Overy is getting paid $1500 an hour to indemnify ISDA with a plethora of exculpation clauses - they know what is coming] 

The ISDN numbers are on all of these securities and the lead managers may be found on Bloomberg or other sources as well as the holders of the debt.  The curtain just lifted and the show is about to get way too interesting!

The full ISDA list may be found here:

http://www2.isda.org/preliminary-greek-obligations/

One example of the problems forthcoming I present from a deal done by Goldman Sachs ISDN XS0292467775 $1.6 Billion Hellenic Republic 2.085 7/15/57 (Offering Memorandum)

“2. STATUS OF THE NOTES AND NEGATIVE PLEDGE

The Notes constitute direct, general, unconditional, unsubordinated and, subject to this Condition, unsecured obligations of the Republic. The Notes rank pari passu with all other unsecured and unsubordinated obligations of the Republic outstanding on 30 March 2007 or issued thereafter without any preference granted by the Republic to one above the other by reason of priority of date of issue, currency of payment, or otherwise. The due and punctual payment of the Notes and the performance of the obligations of the Republic with respect thereto is backed by the full faith and credit of the Republic. So long as any Note remains outstanding, the Republic shall not create or permit to subsist any mortgage, pledge, lien or charge upon any of its present or future revenues, properties or assets to secure any External Indebtedness, unless the Notes shall also be secured by such mortgage, pledge, lien or charge equally and rateably with such External Indebtedness or by such other security as may be approved by an Extraordinary Resolution of the Noteholders (as described in Condition 10).”

I ask; how does this square away with the ECB and the EIB securing for themselves a senior position to other Greek bondholders?

“EVENTS OF DEFAULT

If any of the following events (each an “Event of Default”) occurs:

(a) the Republic defaults in any payment of interest in respect of any of the Notes or Coupons and such default is not cured by payment thereof within 30 days from the due date for such payment; or

(b) the Republic is in default in the performance of any other covenant, condition or provision set out in the Notes and continues to be in default for 30 days after written notice thereof shall have been given to the Republic by the holder of any Note; or (c) in respect of any other External Indebtedness in an amount equal to or exceeding U.S.$25,000,000 (or its equivalent), (i) such indebtedness is accelerated so that it becomes due and payable prior to the stated maturity thereof as a result of a default thereunder and such acceleration has not been rescinded or annulled or (ii) any payment obligation under such indebtedness is not paid as and when due and the applicable grace period, if any, has lapsed and such non-payment has not been cured;

or

(d) a general moratorium is declared by the Republic or the Bank of Greece in respect of its External Indebtedness or the Republic or the Bank of Greece announces its inability to pay its External Indebtedness as it matures; or

(e) any government order, decree or enactment shall be made whereby the Republic is prevented from observing and performing in full its obligations contained in the Notes, then the holders for the time being of at least 25 per cent. of the aggregate principal amount of the outstanding Notes may (i) give notice in writing to the Republic and to the Agent in accordance with Condition 11 that such Notes are immediately due and payable at their principal amount together with accrued interest (if any) or (ii) decide at a meeting that such Notes are immediately due and payable, whereupon such Notes shall become immediately due and payable at their principal amount together with accrued  interest (if any) and/or (iii) decide at a meeting that, if the case may be, litigation be instituted. The holders of at least 66 2/3 per cent. of the aggregate principal amount of the Notes (at the time being outstanding) may rescind (i) such notice of acceleration (ii) such decision to accelerate or (iii) such decision to institute litigation if the event or events of default giving rise to the declaration or to the decisions have been cured or waived. Such rescission shall be made by giving notice in writing to the Republic and to the Agent whereupon such declaration or decision shall be rescinded and have no further effect. No such rescission shall affect any other or any subsequent Event of Default or any right of any Noteholder in relation thereto. Such rescission will be conclusive and binding on all holders of the Notes.”

You will note that by not paying the full amount to the Greek bondholders that a “general moratorium was declared” and that these “Notes shall become immediately due and payable at their principal amount together with accrued interest”

USD 5,000,000,000 Euro Medium

Term Note Programme

The Hellenic

Republic English Law

(a) Information Memorandum dated 6 November 1995

(b) Information Memorandum Addendum dated 6 November 1995

(c) Information Memorandum Addendum dated 2 May 1996

(d) Pricing Supplement dated 3 July 1997

X - Pricing Supplement n/a Pricing Supplement unsigned

68 08 August 2017 XS0079012166

JPY 50,000,000,000 3.80 per cent.

Notes due 2017 issued pursuant to

the USD 10,000,000,000 Euro

Medium Term Note Programme

The Hellenic Republic English Law

(a) Information Memorandum dated 5 August 1997

(b) Information Memorandum Addendum dated 5

August 1997

(c) Pricing Supplement dated 7 August 1997

X - Pricing

Supplement n/a Pricing Supplement

unsigned

69 30 April 2019 XS0097010440

JPY 25,000,000,000 Euro Medium

Term Note issued pursuant to the

USD 20,000,000,000 Euro Medium

Term Note Programme

The Hellenic

Republic English Law

(a) Information Memorandum dated 29 May 1998

(b) Information Memorandum Addendum dated 29

May 1998

(c) Pricing Supplement dated 30 April 1999

n/a

70 21 May 2014 XS0097596463

EUR 70,000,000 15 Year Euro

CMS Indexed Notes with

Embedded Floor issued pursuant to

USD 20,000,000,000 Euro Medium

Term Note Programme

The Hellenic

Republic English Law

(a) Information Memorandum dated 29 May 1998

(b) Information Memorandum Addendum dated 29

May 1998

(c) Pricing Supplement dated 21 May 1999

X - Pricing

Supplement n/a Pricing Supplement

unsigned

71 03 June 2019 XS0097598329

EUR 110,000,000 20 Year Euro

CMS Indexed Notes with

Embedded Floor issued pursuant to

USD 20,000,000,000 Euro Medium

Term Note Programme

The Hellenic

Republic English Law

(a) Information Memorandum dated 29 May 1998

(b) Information Memorandum Addendum dated 29

May 1998

(c) Pricing Supplement dated 3 June 1999

X - Pricing

Supplement n/a Pricing Supplement

unsigned

72 14 April 2028 XS0110307930 EUR 200,000,000 6.14 per cent.

Notes due 14 April 2028

The Hellenic

Republic English Offering Circular dated 13 April 2000 n/a

73 Interest Payment Date

falling in May 2012 XS0147393861

(a) EUR 300,000,000 Floating Rate

Notes due 2012

(b) EUR 150,000,000 Floating Rate

Notes due 2012 (to be consolidated

and form a single issue with the

EUR 300,000,000 Floating Rate

Notes due 15 May 2012 issued by

the Republic on 15 May 2002)

The Hellenic

Republic English Law

(1) Offering Circular dated 13 May 2002

(2) Offering Circular dated 23 March 2009

n/a

74 08 April 2016 XS0165956672 EUR 400,000,000 4.59 per cent.

Notes due 8 April 2016

The Hellenic

Republic English Offering Circular dated 4 April 2003 n/a

75 17 July 2034 XS0191352847 EUR 1,000,000,000 5.20 per cent.

Bonds due 17 July 2034

The Hellenic

Republic English Offering Circular dated 29 April 2004 n/a

76 Interest Payment Date

falling in May 2034 XS0192416617 EUR 1,000,000,000 Floating Rate

Notes due 10 May 2034

The Hellenic

Republic English Offering Circular dated 7 May 2004 n/a

77 Interest Payment Date

falling on 6 July 2025 XS0223064139 EUR 400,000,000 Fixed to CMS

Spread Linked Notes due 2025

The Hellenic

Republic English Offering Circular dated 4 July 2005 n/a

78 Interest Payment Date

falling on 7 July 2024 XS0223870907

EUR 250,000,000 Fixed to Floating

Rate Capped Government Bonds

due 2024

The Hellenic

Republic English Offering Circular dated 5 July 2005 n/a

79 Interest Payment Date

falling on 13 July 2020 XS0224227313 EUR 250,000,000 CMS - Linked

Notes with Global Floor due 2020

The Hellenic

Republic English Offering Circular dated 12 July 2005 n/a

80 Interest Payment Date

falling on 19 April 2021 XS0251384904 EUR 250,000,000 CMS - Linked

Notes with Coupon Floor due 2021

The Hellenic

Republic English Offering Circular dated 18 April 2006 n/a

81 Interest Payment Date

falling on 31 May 2021 XS0255739350

EUR 100,000,000 Fixed to Floating

Rate Capped Government Bonds

due 2021

The Hellenic

Republic English Offering Circular dated 30 May 2006 n/a

82 Interest Payment Date

falling on 9 June 2021 XS0256563429 EUR 150,000,000 Fixed to CMS

Spread Linked Notes due 2021

The Hellenic

Republic English Offering Circular dated 8 June 2006 n/a

83 Interest Payment Date

falling on 5 July 2018 XS0260024277 EUR 2,100,000,000 Floating Rate

Notes due 2018

The Hellenic

Republic English Offering Circular dated 4 July 2006 n/a

84 Interest Payment Date

falling on 10 July 2026 XS0260349492 EUR 130,000,000 Fixed to CMS

Spread Linked Notes due 2026

The Hellenic

Republic English Offering Circular dated 7 July 2006 n/a

85 Interest Payment Date

on 22 February 2019 XS0286916027 EUR 280,000,000 Fixed to CMS

Spread Linked Notes due 2019

The Hellenic

Republic English

(a) Terms & Conditions

(b) Termsheet (signed)

X - T&Cs n/a

No offering documents

produced for this issue of

Bonds - extracted T&Cs

reviewed.

86 Interest Payment Date

falling on 25 July 2057 XS0292467775

(a) EUR 1,000,000,000 2.085 per

cent. Inflation Linked Notes due 25

July 2057

(b) EUR 600,000,000 2.085 per

cent. Inflation Linked Notes due 25

July 2057 (to be consolidated and

form a single issue with the EUR

1,000,000,000 2.085 per cent.

Inflation Linked Notes due 25 July

2057 issued by the Hellenic

Republic on 30 March 2007)

The Hellenic

Republic English

(a) Offering Circular dated 29 March 2007

(b) Offering Circular dated 28 March 2008

n/a

87 Interest Payment Date

falling on 11 April 2016 XS0357333029

(a) EUR 3,550,000,000 Floating

Rate Notes due 11 April 2016

(b) EUR 550,000,000 Floating Rate

Notes due 11 April 2016

(c) EUR 500,000,000 Floating Rate

Notes due 11 April 2016

(d) EUR 1,000,000,000 Floating

Rate Notes due 11 April 2016

The Hellenic

Republic English

(a) Offering Circular dated 9 April 2008

(b) Offering Circular dated 9 July 2008

(c) Offering Circular dated 17 July 2008

(d) Offering Circular dated 8 August 2008

n/a

88 Interest Payment Date

falling on 25 June 2013 XS0372384064 USD 1,500,000,000 4.625 per cent.

Bonds due 25 June 2013.

The Hellenic

Republic English Offering Circular dated 24 June 2008 n/a

Austria Faces $1.3 Billion Bank Injection After ISDA Triggers Greek CDS

Business Week,

9 March, 2012

Austria is facing a capital injection of as much as 1 billion euros ($1.3 billion) into KA Finanz AG less than two weeks after bailing out Oesterreichische Volksbanken AG. (VBPS)

The International Swaps & Derivatives Association yesterday ruled that Greece’s use of collective action clauses forcing investors to take losses under the nation’s debt restructuring will trigger default insurance payouts.

In a statement before ISDA’s decision, KA Finanz said it may have risk provisions of about 1 billion euros if credit- default swaps on Greece it has written are activated. That includes charges of 423.6 million euros on an assumed loss quota of 80 percent, it said.

KA Finanz is the so-called bad bank of Kommunalkredit Austria AG, which was nationalized in 2008 when it was owned by Volksbanken and Dexia SA. While Kommunalkredit continues as a municipal lender and has to be sold again by Austria by mid-2013, KA Finanz took on securities, loans and CDS that are not part of that main business and is winding down those assets.

Austria has promised to keep KA Finanz’s capital ratio at 7 percent and Finance Ministry Maria Fekter said on March 3 that the country may have to inject as much as 1 billion euros into KA Finanz to keep that pledge.

The Alpine republic also has nationalized Hypo Alpe-Adria- Bank International AG and on Feb. 27 announced that it would take a stake of as much as 49 percent in Volksbanken after injecting 250 million euros into the lender and writing off 700 million euros of previous sate aid. Austria is boosting its banking tax to finance the Volksbanken bailout. It has yet to say how it may finance KA Finanz.