The International Institute of Finance, a consortium of the largest global banks, just released a term sheet for a Brady-type Plan for Greece.
The menu of options include Par and Discount Bonds, with principal collateral, and a buyback option. The coupon on the 30-and 15-year Par Bond will step-up from 4-5 percent. The Discount Bond, which includes a 20 percent haircut at exchange, will have a 5.9 percent coupon and 30-year maturity. This sounds a lot like the paper we presented here in April.
Europe finally gets it and is beginning to address the periphery’s structural debt overhang, though the term sheet says the deal is “unique” to Greece due their “exceptional circumstances.” Many of Europe’s largest banks have already signed on to the deal, including Deutsche Bank, BNP Paribas, Société Générale, Commerzbank, and ING.
The haircut, some will no doubt argue, may not be big enough, but it’s a start. European bank stocks were up big today, some almost 10 percent. Our sense, the markets will like it, but you never know. We need to further analyze the term sheet and will get back to you. Stay tuned!
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