Greek Debt Crisis

Some Greek bond holders want to avoid major loss

Bob Moon Mar 8, 2012

Bob Moon: Lose a lot, or lose a lot more? That’s the question facing investors who’ve lent money to Greece. Today’s the deadline for deciding if they want to swap the bonds they already hold for ones worth around 70 percent less. That’s what’s known among lenders as a big haircut. But some investors complain it’s more like a scalping, and they plan to vote no.

Investment manager Patrick Armstrong is among them. He’s on the line with us from London. Good day, sir.

Patrick Armstrong: Good day, how are you?

Moon: Good, thank you. You own Greek bonds, so what’s the process that you’re going through today?

Armstrong: So Greece is looking for voluntary participation in a restructuring of its debt today. We’ve got a small holding in Greek bonds. We voted no; that we won’t be participating in the restructuring on a voluntary basis. However, Greece passed a law last week where if 66 percent of people who vote vote yes, then Greece now has the ability to force everyone to participate on the same terms as the people who did it voluntarily.

Moon: But, if too many people vote no, many critics say that it could spark a messy default and another financial crisis. Why risk that?

Armstrong: Well, our holding is so small, we’re immaterial really. We’ve got a fraction of a percent in our portfolios, and it’s a very, very, very high probability that there’ll be enough votes to get action clauses through.

Moon: Do you think things with Greece are as dire as many people make them out to be?

Armstrong: Things with Greece are dire. They’ll be getting $130 billion in a couple of weeks, and that’ll see them through the next two years — almost. And the forecasts are that Greece will continue to bring its debt, as a percentage of the size of its economy, down in the next eight years, toward 120 percent of its GDP. And we don’t think that Greece will generate the type of economic growth that’s needed to do that. So we expect Greece will be defaulting again in a couple of years’ time.

Moon: Investment manager Patrick Armstrong in London. Thanks for joining us.

Armstrong: Thank you.

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