Greek Default Risk Returns

New government faces upcoming payments on bonds.

Two months after forcing through the biggest-ever sovereign bond restructuring, Greece once again faces the prospect of becoming the first developed nation to default on its debt.

The government taking office after this weekend’s election has 30 days to decide whether to make today’s interest payment on 20 billion yen ($250 million) of 4.5 percent notes maturing in 2016, or default. Then, by May 15, officials must decide if they’re going to repay the 436 million euros ($555 million) due on a floating-rate note issued a decade ago.

Foreign Investment

A failure to pay may compromise swaps and bilateral investment treaties with Greece, according to Andreas Koutras, an analyst at ITC Markets in London.

PSI Accord

Greece achieved a high participation rate in the PSI debt exchange because almost all of its debt was governed by domestic law. Parliament legislated to insert so-called collective action clauses, or CACs, into terms of the notes retroactively, allowing a qualified majority of bondholders to agree on a loss that holdouts would also be legally obliged to accept.

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