·         Highlight the deadlines that need to be met by Greece to successfully exchange existing bonds.

·         Handicap potential outcomes of the debt exchange offer.

Steps that Greece needs to take

Exhibit 1  shows the steps that Greece needs to take for successful completion of PSI. The most important deadlines are:

• Thursday, 8 March, 9 PM CET (8PM London time): Deadline to respond to the offer.
• Friday, 9 March: Announcement of results.

Handicapping the potential outcomes of the Greek debt restructuring

There are three potential outcomes:

1.     Scenario 1 (5-10% probability): Less than 50% (by face) of local-law bondholders respond to the restructuring offer OR More than 50% respond but less than 66% of the respondents agree to the restructuring. In this case, Greece will be unable to invoke CACs, leading to a hard default on 20 March. Although recent media reports suggest that takeup on the exchange offer is currently very low, we believe that this scenario has a very low probability of occurrence

2.     Scenario 2 (90% probability): More than 50% of local law bondholders respond to the restructuring offer AND more than 66% of these respondents agree to the restructuring. This is our baseline scenario and will result in invocation of CACs, thereby resulting in CDS triggers. Although Greece would rather not invoke CACs (Exhibit 3), recent press reports suggest that the ECB expects participation to be low enough such that CACs will need to be invoked.

3.     Scenario 3 (<5% probability): Near universal participation by bondholders, thereby avoiding the invocation of CACs. This is very low probability scenario in our mind