Wednesday, May 5, 2010

[UBS Research ]Greece: What now? $NBG Market concerns about debt restructuring

Greece: What now?
Market concerns about debt restructuring
Until recently, we and the markets assigned a low probability to debt restructuring – it was not our central case. However, the events of the past week, together with yesterday’s S&P downgrades, have changed matters. Debt restructuring concerns are rising.

What are the medium-term implications?
Debt restructuring must now be considered a plausible outcome. However, restructuring may not necessarily trigger default – markets might well mis-price the outcome. Our analysis of the fair value for Greek debt is consistent with a c15% ‘haircut’. We have cross-checked our analysis through historical comparisons of debt crises in Eastern Europe (Hungary and Latvia) and debt restructuring in Latin America (Uruguay).

Greece: What now?

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