In the neverending saga that is the Greek exchange offer we have a new and very important player: the head of the Greek debt management agency, Petros Christodoulou, who is now actively threatening any Greek hold out hedge funds against doing what is in their LPs' best interests (suing Greece and the EU and holding out for par recoveries - as discussed here), by using not only the now trite and idiotic Mutual Assured Destruction clause which only those stuck in 2008 believe is remotely credible, but by advising hedge funds (which are actively forming ad hoc hold out committees as we speak, just as we predicted 6 weeks ago) that "there is just no money for holdouts...We are prepared for legal challenges but the risk here is that people are trying to be too smart." Oh, so now if one does what is in their interest, and dare hold out against collectivist fascist interests, they are "trying to be smart." We wonder if Mr. Christodoulou learned such brute force negotiating tactics at one of his former employers: JP Morgan or Goldman That's right - as we wrote over two years ago, the man who is now negotiating for Greece's and Europe's life (because a failed PSI will not only trigger CDS, more importantly it will result in an out of control default of Greece and likely its exist from the Euro and the Eurozone - two things that Germany would be delighted to see) is a former employee of the two companies that just so happens are the co-chairmen of the US Treasury Borriwng Advisory Committee, or as we have also called it before, "The Supercommittee That Really Runs America." Is the pattern finally emerging?

From the NYT:

Mr. Christodoulou declined to comment on whether the clause would be activated but he did underline that the consequences of a failed deal are dire not just for Greece but for bondholders too. The alternative, he said, “is too dire to contemplate.” He added that if this deal failed, the next offer bond holders would get would be far inferior, lacking the incentives that the current offer has. Mr. Christodoulou said that it was too early to get a sense of what the participation rate would be but that he said he was confident that at the end of the day enough investors would agree to the deal to reach the target. “We are targetting near universal participation,” he said. “We have spent a lot of time on this — now we are ready to implement it.

Also as said here countless times before, the hedge funds certainly have the upper hand in the standoff with Greece, if only they successfully collectivize and form a hold out stake. Guess what: that's precisely what they are doing, using Bingham McCutchen (if any readers have a Greek bond stashed somewhere, whether it is Greek or UK-law, and wish to prevent this travesty from happening, reach out to Bingham and join the hold out group).

Nevertheless numerous hedge funds have been accumulating a range of Greek bonds that are governed by foreign law in the hopes of of making a legal challenge. These securities range from bonds issued by Greece’s near bankrupt railway firm to so-called pharma bonds — bonds issued by the Greek government and paid to cash-starved Greek pharmaceutical companies in place of cash Law firms like Bingham McCutchen have been soliciting hedge funds, asking that they form a consortium to challenge Greece by accumulating enough of these types of bonds so that they might be able to block the deal and perhaps receive near full payment from the Greek government. The rationale being that Greece would rather pay off these investors as opposed to having to fight them in court.

Needless to say, the TBAC crony is not happy at the prospect of an out of control default collapse of the system unless the hedge fund hold outs aren't bribed to comply.

Mr. Christodoulou sees little chance of this happening. “We feel we need to honor the long term investors who will participate in the deal,” he said. “It is not in anyone’s interest to see them take a 70 percent haircut while others get par.”

Uh sorry Pet, it's not about what seems fair to your crony accomplices. It's what makes the most money. And the best strategy right now is for hedge funds to build up pair trades (buy CDS and bonds) going into the PSI and just say no, knowing very well that they have all the power in the world if more than 25% of hedge funds announce they refuse to participate in the coercive PSI.

Just as we have been saying for months.

And incidentally, here is a modest suggestion for Germany: if you want to hate someone, hate Goldman Sachs. After all, Goldman is the firm that spawned not only Mario Draghi who as we wrote yesterday is now the most hated man in Germany, but also this Greek pawn whose only job now is to do everything in his power to keep Greece part of the Union - something that well over 60% of Germans do not want. And as a reminder, it was also Goldman who allowed Greece to reach to its catastrophic debt load in the first place by coming up with clever ways to disguise its debt. Yup: if there is anyone who can play not both, but all three side of the game (including be the referee) it's Goldman.