Hedge Funds IMF
Hedge Funds Spar with IMF over Greek Debt
A proposed IMF plan to swap Greek bonds and thus relieve some of the debt burden for Greece has run into a wall: hedge funds. Hedge funds have built up a strong position on the Greek bonds and several are reportedly unwilling to agree to a solution that would involve a bonds swap. However, if a deal does not materialize in time, Greece stands to lose out on its second bail-out package.
Bondholders need to give up some 100 billion euros ($130 billion) of their investment in the planned bond swap, drawn up in October, but many hedge funds plan to stay out of it.
They either prefer letting the country go under, which would trigger the credit insurance they have bought, or hope to get paid out in full if enough others sign up. That puts them in direct conflict with the IMF, which wants to force Greece's cost of financing down to an affordable level.
"The play is purely 'they'll be forced to pay me'. Greece will want to avoid a wider default. so if it managed to restructure 80 percent of the deal and pay the rest that's still better," said Gabriel Sterne at securities firm Exotix.
Without a deal, the IMF, the European Union and the European Central Bank -- the so-called troika of official lenders -- will not pay out a second bail-out package Greece needs to survive.
EU Economic and Monetary Affairs Commissioner Olli Rehn said on Tuesday that negotiators were "about to finalize shortly". But time is running out. Source
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