2012 Greek default & Subsequent Debt Restructuring Harvard Case Solution & Analysis

2012 Greek default & Subsequent Debt Restructuring Case Study Help

Current Price:It depends on the interest rate. This means that the investor can purchase the bond on the face value, above the face value and below the face value. The face value of bond is 7.5 cents for first and second note of EFSP and 31.5 cents for series notes.


The haircut is calculated for each case. Haircut means the loss from the exchange of existing bond with the new one. There will be a change in the values as the prices of market change with the time. The haircut for both, short-term and long-term are calculated for two different bonds of Greek government, with one having a maturity of 1 year while another having the maturity of 20 years.

The haircut of short-term bonds is better as the investor’s loss on swap is less than the long-term bonds offered by the Greek government.The haircut is calculated with 100 and subtracting the present value of bond of short-term and long-term. The short-term loss for investors is 89.55 and long-term is 89.59. By these calculations, the investor with the larger haircut is long-term bond investor.(See Exhibit 2 and 3)

Yield to Maturity

The yield to maturity is the expected return on the bond until the bond matures. It is an annual rate. It is also same as current yield that divides the yearly cash flows and shows how much money will be accumulated in a year of holding a bond. Yield to maturity accounts for PV of bond’s future payment of coupon. YTM is also known as the discount rate that returns for the market price of the bond. This also means that YTM = IRR


{(Face Value/Bond Price) 1/n} -1

The yield to maturity is calculated for long term and short-term bonds offered by Greek government. The number of payments in short-term is 2 and long-term is 31. Price of bond in short-term is 10.45 and long-term is 10. 41. Payment in short-term is 0.075 and for the long-term it is calculated as 1.34. The calculation of YTM shows that it is greater in short-term as 209% and lower in long-term, i.e. 3%. This means that YTM of short-term bond’s investment is far better than the long-term bond investment. (See Exhibit 4 and 5)


From the above calculations of NPV, cash flow, promised payments, haircuts and yield to maturity of the Greek government offered bonds for short-term and long-term; it is concluded that the investors of bondholders should invest in the short-term notes as they are more profitable...................................


This is just a sample partical work. Please place the order on the website to get your own originally done case solution.

Share This


Save Up To




Register now and save up to 30%.