I Like the Way that This (These) Guy(s) Think

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This proposal for Cyprus is brilliant:

So TMM propose the Cypriot Government do the following  – they’ll have to do it very quickly to avoid the ECB panicking and pulling back the ELA cash lent against dodgy collateral. Once done, the ECB will not be able to do anything about it.

  1. Transfer all bank deposits & unencumbered assets from the existing Cypriot banks to new bank holding companies: e.g. Cyprus Phoenix Bank. This should include the transfer of IT infrastructure, the branch network & any tangible assets like real estate (e.g. the banks’ HQs).
  2. Let the old banks go bankrupt, leaving the ECB with EUR 9bn of losses and wiping out both the subordinated & senior bondholders (EUR 1.75bn).
  3. These new banks are now adequately capitalised & under EU law, the ECB will not be able to prevent their participation in Target 2 via the Central Bank of Cyprus. The ECB may well kick & scream, but there will be nothing they can do about it.
  4. Domestic Bills/Bonds haircut by 80% for non-Cypriot banks. Although their non-bank ownership is small, every little helps, & using JPM’s ownership estimates, this would produce ~EUR 820m.
  5. The international bonds under UK (with a 75% CAC hurdle) are certainly tough to PSI, but let’s all be realistic, there’s no money left & government debt is at astronomically large amounts of GDP. TMM believe that Cyprus will be more successful than market punters reckon in restructuring this debt. And of course, they can also just unilaterally default on the debt. Again, an 80% haircut here sounds realistic, producing EUR 3.04bn.
  6. Adding the Gas reserve privatisation (which JPM estimate at EUR 4.2bn), TMM have found EUR 18.9bn. 
  7. Cyprus could also, of course negotiate with the Russians to restructure the EUR 2.5bn loan, and if they are able to get say 20% NPV reduction on this, they could make the terms on the international bond restructuring less-onerous.

I’m not a fan of the proposal to privatizing the gas reserves, I think that it’s stupid to sell the future for pennies on the dollar, but otherwise I like it.

It appears legal, and it legally f%$#s the powers that be of finance, and it doesn’t make the people of Cyprus pay for their banksters fraud.

Them that broke the world should pay, but that will never happen.

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