Greece Goes Down to the Wire, Again!


Greece goes down to the wire: The Institute of International Finance (IIF), the entity representing creditors in the Greek private equity swap, estimates that a disorderly default on Greek debt would cost Europe north of 1 trillion euros ($1.3 trillion): 177 billion euros in losses for the European Central Bank ; 380 billion euros for additional support for Ireland and Portugal (already receiving aid); 350 billion euros to shore up Spain and Italy; and 160 billion for bank recapitalization.

We will find out Thursday night how many bondholders have accepted the Greek deal. There’s obviously some concern that a disappointingly large number of bondholders may turn down the offer. Rumors are already swirling they will have to extend the deadline.

Obviously, this is an alarmist tract that was likely deliberately “leaked” to scare everyone into cooperating — but is it entirely inaccurate? It should not be dismissed outright.

More importantly: How many bondholders will vote in favor of the deal? The IIF represents the roughly 450 does NOT represent hedge funds , which are also substantial holders of the sovereign debt . Hedge funds could be positioned in such a way they would benefit if the deal falls apart. It depends on the cost basis, where the recovery value is, etc. Many hedge-fund players reportedly bought U.K. debt law (only a small part of the private sector deal) — if the deal falls apart, they could go to the U.K. courts and may likely have a higher recovery value.


1) Europe in recession : Revised euro zone fourth-quartergross domestic product was down 0.3 percent from the previous quarter; household spending and exports both fell. This follows on the disappointing February factory numbers for Europe, out yesterday.

2) Brazil’s economy grew at 2.7 percent in the fourth quarter, the slowest pace in two years.

3) Dick’s Sporting Goods falls 1.7 percent after meeting analysts’ fourth-quarter earnings expectations, but reporting same-store sales short of estimates due to mild weather. Fourth-quarter same-store sales rose 0.1 percent, compared to expectations of a 0.8 percent increase. The retailer saw a 2.5 percent sales decrease at its stores; however, strong sales online and at its Golf Galaxy stores boosted the company’s fourth-quarter earnings by 27 percent.

4) Merck & Co. shares drop 1 percent pre-market after the drug maker said it sees first-quarter earnings below the Street’s estimates and warned that currency will negatively impact sales by one to two percent during the first quarter. Merck expects first-quarter non-GAAP earnings to be between $0.95 and $0.98, compared to analysts’ $1.01 estimate. The Dow Jones Industrial Average component confirmed its prior 2012 earnings guidance of $3.75 to $3.85, bracketing the Street’s $3.82 expectation.

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