UBS: The debt crisis: Greek CDS settled, official loss on bonds is 78.5%
The debt crisis: Greek CDS settled, official loss on bonds is 78.5%
All Greek bonds issued under domestic law have been exchanged and we expect most of the foreign law bonds to be exchanged over the coming weeks.
Greece’s default on its bonds has triggered CDS contracts and an auction to settle all open contracts on 19 March has set the final recovery value at 21.5%, implying a total loss for Greek bondholders of 78.5%.
The 20 newly issued Greek bonds trade at a weighted average yield of 16.5%, implying a high risk of a second default event. In light of the need for a massive further debt reduction for Greece, we initiate coverage on the new bonds with a Sell recommendation.