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@Rik:
Agree that using the banks as collateral creates the same issues. I do
not think that the word external helps here at all. The wording of the
negative pledge clause is very clear and any borrowed money denominated
in a currency other than the euro or subject to a law other than Greek
law would fall under the definition of External Indebtedness (no matter
whether a potential SPV is incorporated in Lux or Greece). If the
borrowed money is subject to English law it would fall under this
definition no matter what the law governing the collateral is (and
assuming that Finland agrees to Greek law collateral which I seriously
doubt since they should know by now what is likely to happen with any
Greek law instrument).
There are ways to reduce the legal risk of triggering an event of default whilst providing some sort of collateral and some solutions are better than others but all of them fall in a grey "litigation-prone" area (the worst possible solution being that of providing an outright cash collateral payment to Finland which unfortunately is the only one that has been agreed and announced so far).
At the end of the day, the only real water-tight solution but would be though for Greece to honour its obligations under the negative pledge and not to post any kind of collateral (or alternatively allow the relevant bondholders to participate in that collateral as per the wording of the negative pledge). Unfortunately it does not look as if this was the intention of the Greek/EU authorities and I expect some major litigation however they structure the collateral.
There are ways to reduce the legal risk of triggering an event of default whilst providing some sort of collateral and some solutions are better than others but all of them fall in a grey "litigation-prone" area (the worst possible solution being that of providing an outright cash collateral payment to Finland which unfortunately is the only one that has been agreed and announced so far).
At the end of the day, the only real water-tight solution but would be though for Greece to honour its obligations under the negative pledge and not to post any kind of collateral (or alternatively allow the relevant bondholders to participate in that collateral as per the wording of the negative pledge). Unfortunately it does not look as if this was the intention of the Greek/EU authorities and I expect some major litigation however they structure the collateral.
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