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  • jpomper jpomper Sep 25, 2011 3:42 AM Flag

    Jpomper: A valuation question :)

    Hi Sam,
    on NBG a few thoughts:

    1) The whole world is conferencing how to handle the crisis in Greece. Nobody wants a spontain banktruptcy, run on banks, greek drama proceeding toward similar conclusion and statehood like after-earthquake in Haiti, with many tears.

    2) Clearly, now the greeks would like an excessive 50% bond haircut, so they get rid half of debt. The remaining 80%GDP debt is what they consider as they are capable of paying.
    They would like to get away from the mess they made, on the cost of their creditors, and hardly pay half the price for ther "IRRATIONAL EXUBERANCE" of the last 10 years.

    On the other side, the creditors want a maximum 21% haircut, plus a full package of austerity, a onetime Greek privatization (railroads, ships, realestate, telecoms to sell) income spent on repayment, and some orderly restructuring toward cutting state spending and increasing taxation.

    3) The greek people took the stance of those mortgage holders, who took excessive debt on their house, and then run out of money, and hand back the keys to the bank, and leave the house without payment.

    And ask with a smile: "Why all suffering???"

    Their politicians are responsible for their debt. They voted them in power. You can not have default & restructure with no payment, as options. Greeks need to do what they have to and pay what they owe.

    No one complained when their govt hiring 10% of population just for paying them for coming in at time, and reduce retirement age. Now they should shut up and pay.
    Corporations has BK as option, when a company go BK common share holders will be wiped out and assets will be sold. When a country become insolvent some thing should happen to its assets and citizens as they are like assets and shareholders. Why only investors should take the burden???

    4)The creditors should behave as if they foreclose Greece: they must remain strong and determined. Otherwise, they create huge moral hazard. Yes, a spontain banktrupcy with greek tragedy "a la Haiti" is to be avoided, just like a "la vache qui rit" on the part of greek politicians, and generate further risk of nonpayment down the road.

    5) If any bank will survive in Greece, it will be NBG. A 21% haircut means for NGB their equity drop from 13% to 8%, and can survive without new rights issue.
    However, at 30% or 50% they probably have to give current shareholders the chance to buy shares on favorable terms, then I will jump in.

    I still give 90% odds for the controlled banktrupcy. Some common sense must remained in greek people and politicians. Otherwise, their country will look like the day after the persian invasion, 2500 years ago: as somebody said here, want they live on feta and olive oil?
    I hope they learned from their history.

    regards, JP

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