Report: Greece PSI Participation Will Be Too Low, ECB Says

From "The Wall Street Journal" - please follow link to original

Now, they are going to FORCE Greek bondholders to take that 75 or so % "haircut".

Of course, it will not be a problem -- "keep walking, these are not the droids you're looking for", etc., etc., etc.
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Report: Greece PSI Participation Will Be Too Low, ECB Says

The European Central Bank expects that the participation rate of Greece’s private creditors in the planned voluntary debt restructuring deal will be too low and collective-action clauses will have to be invoked, a person at the central bank told German weekly magazine Der Spiegel.

Greece has agreed on a debt restructuring with the private sector, which is a precondition for the second bailout package worth EUR130 billion. As part of the offer to private-sector investors that expires Thursday, these investors will have to take a 53.5% loss on their principal and will swap their old Greek bonds with new bonds that have longer maturities and lower coupons. Greece faces a EUR14.4 billion bond redemption on March 20 and needs to tie up external assistance because it doesn’t have enough funds to make the bond payments.

“The retroactive collactive-action clauses will likely have to be applied,” the person told the magazine, according to a prereleased report of its Monday edition.

Greece has already approved a law on collective-action clauses, or CACs, are provisions that bind all bondholders to take part in a debt exchange if a predetermined majority approves of the exchange.

If Greece does use the CACs, such strong-arming would be a clear trigger of CDS payouts under definitions governing the contracts, market participants say. Given the focus of European policy makers on avoiding triggering CDS, some in the markets worry that some entity might be on the hook for more CDS payouts than they can handle.