The Greek debt crisis has been a major theme for capital and high yield markets in YTD 2015. While market reactions so far have been subdued and a third financial assistance package for Greece appears to be within reach, the problems of both Greece individually and the Eurozone as a whole are far from resolved. In a worst case scenario, a Grexit can still cannot be ruled out, in our opinion. Against this background, we believe it is worthwhile to examine how a substantial deterioration in the situation would impact the high yield issuers in our coverage universe.
We start by providing an overview of latest developments in Greece and outline the pending prerequisites before discussions on the next financial assistance programme can commence. We continue by providing our thoughts on the current situation and its broader economic impact. Further on, we outline the framework under which we evaluate the resilience of the issuers in our coverage universe to a potential exacerbation of the crisis. We also highlight some trades which we believe would work well in case the situation deteriorates. Lastly, we provide an overview per issuer, wherein we evaluate each name according to certain criteria included in our framework:
- Short Term Funding Needs
- Degree of Cyclicality
- Exposure to Greece/Eurozone and
- F/X Exposure
Notwithstanding the eventual outcome of the current Greek crisis, the findings from this exercise may be useful in the event of other external shocks that impact the set of criteria we examine in our framework.