Back in March, Greece made a deal to restructure its debt. The majority of Greek bondholders agreed to a write-down that amounted to a 75% haircut. They didn’t want to take the loss, but they basically had no choice. They were told if they tried to hold out and reject the deal, they probably would not get paid at all.
So imagine how much it must sting to watch the few holdouts get paid.
Last Tuesday, Greece made good on a €436 million debt payment to the few who refused the deal.
Greek officials claim that it was the timing of a lack of government that resulted in the payment (after an inconclusive election the week before, there is no new government in place).
But the real reason might be a fear of vultures swooping in for a lawsuit. Most of the payout went one place: Dart Management, an investment fund in the Cayman Islands (according to CNBC). Dart is a vulture fund; it buys the sovereign debt of distressed countries, and then sues the government if it doesn’t get paid.
What’s good for Dart is a slap in the face for everyone else. And it could end up coming back to bite Greece later. The next time the country goes to restructure its debt, its bondholders and creditors aren’t going to be so inclined to yield to pressure.