This article originally appeared in TMA Midwest Blog

December 15, 2011

By David Johnson, ACM Partners

The evolving euro crisis has gotten a fair amount of coverage in the business press, but a recent development signals that matters have reached a new level of seriousness.  Bloomberg News reports that a group of financial firms is seeking to retain restructuring advisors.  Blackstone Group is named as the prospective financial advisor, and law firms White & Case and Allen & Overy has been named as prospective counsel.  The Greek government has already retained Lazard as financial advisor and Cleary Gottlieb as counsel.

Private Greek bondholders are facing a 50 percent haircut on their holdings.  That severe haircut is a condition of continued support of a bailout plan for Greece, which is targeting a debt to GDP ratio of 120% by 2020.

Just as the aftermath of the global Great Recession has called into question the assumption that sovereign debt could be considered risk-free, the increasing involvement of advisors in untangling what is likely only one of the first of many sovereign debt restructuring scenarios marks an increased level of conflict in relations between sovereign debtors and creditors.