Deal on Greece Prompts Worries for BNP, Deutsche Bank
February 22nd, 5:00 am by Benzinga Staff
After twelve hours of back-and-forth negotiating, European leaders have agreed to help Greece avoid a default by providing it with €130 billion ($172 billion). The Greeks won’t hold onto that money for long, as it will go straight to Greece’s creditors, most of whom are based in France and Germany. European banks BNP Paribas and Deutsche Bank will be directly impacted beyond a larger bear market in Europe as investors react to the news.
While the news brings some relief to markets that have dealt with an emotional rollercoaster from Europe as the market oscillated between pessimism and hope, it is far from a win for European debt holders in the short term. Alongside the agreement was a deal with private creditors, who will forgive 53.5 percent of their principal investment and exchange the remainder of their holdings in Greek debt for newly issued bonds. The new notes will have a 2 percent coupon until February 2015, 3 percent for the next five years, and a 4.3 thereafter until expiring in 2042.
The new yields are extremely low because they reflect the security of the European Central Bank, which is backing the new notes through the recently-created European Financial Stability Facility. The EFSF currently has an Aaa rating with Moody’s and an AA+ rating with Standard & Poor’s
