Zero Hedge – Those who have been following the recent developments over the Greek distressed debt buyback, which in any normal universe would have been considered an event of default but certainly not in “special cases” such as Greece where the country’s official default would start the Lehman-like domino collapse as apparently getting a 70 cent haircut in 8 months is a “voluntary” event, have been quite confused by the internal dynamics. On one hand the sole beneficiary of the transaction are those hedge funds who bought the GGB2 bonds when they tanked to lows just barely in the double digits as a % of par; on the other, there is absolutely no benefit to the Greek people as a result of this sub-par prepayment, as the only fund flow benefits hit the bondholders (and it is up to Greece to figure out how to grow its GDP by over 4% per year over the next 8 years). Then let’s not forget that nobody has any clue yet where the funding for said buyback will come from. And finally, as Kathimerini just reported, we learn that one group that has just vocally declared against the buy back are the very people who are supposed to be benefiting from the Greek bailout: i.e., the country’s bankers.

From Kathimerini:

Bank managers are planning to express their opposition to the credit sector’s likely participation in the bond buyback program at a meeting with Finance Minister Yannis Stournaras scheduled for Thursday.

 

The administrations of all commercial banks are stressing that they cannot possibly participate voluntarily in a program that leads to the financial exhaustion of shareholders.

Oops, looks like the local bankers are suddenly far less “voluntary” inclined, after realizing that their equity stakes will be largely impaired in the balance sheet waterfall, which sees bonds previously marked to myth at par, remarked to 35 cents, 20 cents, or whatever the final buyback price is agreed upon, largely a function of whatever cash the Greek government can find hidden underneath the rug.

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