this is not new as probably what they are talking about is a "technical default" and activation of the CACs see my post earlier today on the XJO thread or here you go to explain:
• Greece's creditors, who hold around €207bn of the country's debt, are being asked to take a 53.5% haircut on the 'nominal value' of their bonds. That equates to an actual loss of around 75%. Under the plan, they would exchange their existing securities for new, 30-year Greek bonds, and some higher-value bonds issued by Europe's bailout fund.
The criteria for success
The legal minimum participation rate in the debt swap is 50% -- ie, at least half of eligible bond holders have to take part. That target appears to be 'in the bag', based on the number of banks who have announced they'll take part. Athens had been aiming for a 75% participation rate.
The key issue, then, is how many bond holders agree to swap their bonds.
• An acceptance rate 95% or more: This means the bond swap would be classed as voluntary.
• An acceptance rate between 66% and 95%: The bond swap could not be classed as voluntary. Greece could then compel the remaining bond-holders to take a haircut by activating Collective Action Clauses. In that scenario, Greece would be declared in default, and credit default swaps would be triggered.
• An acceptance rate below 66%: The debt swap would fail.
City experts believe that the second option is most likely.
