ECB debt swap a technicality

The news that the ECB is swapping its 50b euros of Greek bonds for new ones is more on a technicality rather than any altruistic contribution on the part of the ECB to Greece’s solvency. In fact, it’s a move to cover the back of the ECB from being forced into a debt exchange. The new bonds the ECB will get will not have a Collective Action Clause which the current ones do. The CAC is a trigger that would lock in minority bondholders to the vote of a majority of holders to any eventual bond exchange, thus making an exchange involuntary for those in the voting minority. This would also likely trigger a CDS credit event for Greece. The new bonds the ECB will receive will protect them from getting caught up in this, thus not forcing them to abide by any restructuring. This process is separate from any voluntary move by the ECB to sell the bonds back to the EFSF at the price they paid or any other move on their part to contribute to the PSI.

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