JANE BURGERMEISTER REPORT: ‘Credit strategist hints at accountancy tricks for ECB to avert insolvency over 190 billion euros of Greek bonds’
Credit strategist hints at accountancy tricks for ECB to avert insolvency over 190 billion euros of Greek bonds
S&P warns EU over Greek debt
Credit-ratings agency Standard & Poor’s says it will regard any attempt by European Union to renegotiate debt as a default
Philip Inman, The Guardian
“S&P said that…any hint of the word voluntary being used to disguise an imposed cut in loan valuations would also trigger a default notice from the ratings agency and a subsequent downgrade.
Jim Reid, a credit strategist at Deutsche Bank,… said that EU banks could maintain the nominal value of the loans on their balance sheets despite the view of S&P and other ratings agencies that the loans were worth less after the restructuring.
He said the banks and the EU would disguise the real effect of the restructuring.
Without a material cut in loan values, hedging instruments, known as credit default swaps (CDS), can remain untouched. CDSs act as a form of insurance against a bond default by a company or country.
Reid said: “The most important thing is whether a restructuring of Greek debt constitutes a credit default swap trigger. Among the biggest buyers of CDSs are Greek banks as well as French and German ones. So the authorities are not going to let a downgrade hit them, even if S&P goes ahead. The deal will be crafted so the values of the loans remains at par, which means there won’t be a CDS trigger.”
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