GREEK 2012 BOND HAIRCUT SURVIVES CHALLENGE AS ICSID TRIBUNAL REFUSES TO HEAR CASE
Poštová Banka is a Slovak bank that (along with its Cypriot shareholder, Istrokapital SE) sued Greece at the International Centre for Settlement of Investment Disputes (ICSID) for losses incurred due to the 2012 haircut on Greek sovereign bonds. In early 2012, holders of Greek debt were offered a swap of old bonds to new bonds issued by Greece having a face value equal to 31.5 percent of the face amount of the exchanged bonds. In addition, investors were offered European Financial Stability Facility (EFSF) notes with a maturity date of two years or less from the Private Sector Involvement (PSI) settlement date and having a face value equal to 15 percent of the face amount of their exchanged bonds. As a result of the terms of the offer, the notional haircut was 53.5 percent. In fact, Poštová Banka never held Greek bonds directly; instead, it acquired a stake in a pool of freely negotiable, fungible interests by Clearstream in secondary market transactions. As a holder of bond interests, Poštová Banka was in contractual privity with Clearstream and not with the Hellenic Republic. Nonetheless, Poštová and Istrokapital argued that, under the Greece-Slovak Republic and the Cyprus-Greece bilateral investment treaties, they were entitled to compensation for their losses, which amount roughly to half the invested amount of €504m.
Jul-Sep 2015 issue
University of Westminster