New Meaning of the Word Voluntary; Bond Buyback Balancing Act

Courtesy of Mish.

It is a deep stretch of the imagination to twist arms and appeal to “patriotic duty” in an effort to coerce someone to do something they really do not want to, then call the action “voluntary”.

It is yet another thing to claim something is voluntary yet tell them it is “required”. The latter has happened (again), when it comes to Greek debt.

The Financial Times reports Athens banks told of debt buyback ‘duty’

Yiannis Stournaras made clear the country’s four largest banks, which together hold about €17bn of government bonds, would be required to sell their entire holdings even though the buyback is billed as “voluntary”.

It was the “patriotic duty” of Greek bankers to ensure the success of the buyback, due to be launched next week by the country’s debt management agency with up to €14bn of additional European funding, Mr Stournaras said on Wednesday.

Yet Athens bankers appeared reluctant to be forced into a sale that would weaken their balance sheets and discourage local investors from participating in rights issues expected early next year as part of a €24bn recapitalisation of the sector.

“The banks stand to lose some €4bn by having to sell their bonds at around 33 cents on the euro,” said one Athens banker.

About half the €62bn of bonds issued in a partial restructuring of Greek debt last February are held Greek banks, pension funds, state entities and individual investors.

The debt management agency is set to announce details next week of the buyback scheme, which would be completed by December 12, the day before eurozone finance ministers are due to give the green light for disbursing the Greek aid payment.

“Voluntarily Forced”

Whereas Greek banks may be “voluntarily forced” (as if such a ludicrous idea even exists) into steep losses, anyone else holding such debt sure will not be.

Once again this whole notion of “voluntary” rests on arbitrary decisions as to what will trigger credit default swaps.

In that regard, please recall that in October 2011, the labeling of labeling 50% haircuts on Greek debt as “voluntary” proved many “Standard” Credit Default Swaps on Greece Are a Sham….

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