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Global bondholders to decide on Greek swap offer

Global bondholders to decide on Greek swap offer
On Friday September 9, 2011, 4:26 am EDT
By George Georgiopoulos

ATHENS (Reuters) – Investors in Greek government debt worldwide will tell regulators on Friday whether and how they will participate in a bond swap aimed at giving Athens more time to emerge from a debt crisis, with officials expecting a take-up of about 70 percent.

Athens gave banks and insurers in 57 countries until September 9 to say whether they intend to take its debt exchange offer, a key part of a second 109 billion euro bailout package it clinched at a July 21 euro zone summit to avoid bankruptcy.

“September 9 is the cutoff date and it is very likely that we may have a bigger response rate as bond holders rush on the last day,” a source close to the procedure said on condition of anonymity.

Greece had threatened to cancel the deal unless it got 90 percent participation, which would see 135 billion euros ($189 billion) of its outstanding bonds maturing by 2020 swapped or rolled over in a global transaction it wants to conclude next month.

But the country is not in a strong position to walk away from the scheme. It is already faced with the threat of its EU partners blocking an 8-billion euro bailout aid tranche if it does not improve its debt-cutting performance.

Greek authorities have said they are pleased with the progress of the private-sector involvement (PSI) program without disclosing details on take-up rates, which bankers say are around 70 percent — a level they say would still be considered successful.

“Even with a participation rate of 70 percent or better, which is my current view, the PSI will proceed,” said an Athens-based banker close to the procedures.

German investors share that view, a big German bondholder told Reuters. A 75 percent takeup rate would be a success and enough to convince the political side of the deal, 90 percent was unrealistic from the beginning, he said.

The threat to walk away may merely be a tactic by Athens to get most of bondholders on board, bankers said.

Greece is not planning any announcement on Friday as bondholders’ non-binding responses must be aggregated by their respective regulators which will then send data to Athens, a process that may take time, the debt agency chief has said

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