by Richard Barley
Wall Street Journal
March 9, 2012
Most of Greece's bondholders have bowed to the inevitable. Asked to take part in the biggest sovereign-debt restructuring ever, covering €206 billion ($273.46 billion) of debt, holders of €172 billion of bonds agreed. Collective-action clauses will boost the participation to €197 billion, 96% of the total, triggering credit default swaps. Greece should get its second bailout, and the threat it has posed to global markets should recede. But there are still some loose ends.
Some bondholders chose not to tender. The €25 billion of Greek-law bonds still outstanding will be swept up through collective-action clauses. More importantly, some €9 billion of international-law and state enterprise bonds, where investors may have a stronger position, weren't tendered. Greece has extended the tender for these bonds to March 23 and warned that after that, there will be no sweeteners.
If holdouts remain, they will have to be dealt with. An outright Greek default on these bonds is a possibility, since it no longer poses a systemic problem. It is unlikely euro-zone governments will pony up more taxpayers' cash to repay some private bondholders in full. Bondholders will then have to take their chances through the courts.