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08 March 2012

Bloomberg: 60 per cent of Greek bondholders committed to debt swap


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Investors with about 60 per cent of the Greek bonds eligible for the nation's debt swap have so far indicated they will participate, putting the country on the verge of the biggest sovereign restructuring in history.


Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas (BNP) SA, Commerzbank AG (CBK) and Assicurazioni Generali SpA (G), have agreed to the offer. That brings the total to about €124 billion ($163 billion), based on data compiled by Bloomberg from company reports and government statements. The goal of the exchange is to reduce the €206 billion  of privately-held Greek debt by 53.5 per cent and turn the tide against the debt crisis that has roiled Europe for more than two years. While Greece would prefer a voluntary deal, the government has said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so-called private sector involvement falls short and it gets sufficient approval from investors to change the bonds’ terms.

“Adding up the commitments to participate in the Greek PSI, it is now clear that the CAC hurdles will very likely be cleared”, Commerzbank’s head of fixed-income strategy, Christoph Rieger, said in a note yesterday. Under the rules of the exchange, investors holding at least 50 per cent of the eligible bonds must vote on the swap, and 66 per cent of those must agree to amend the bonds to enable the government to impose the collective action clauses, Rieger said.

Investors who participate will get new bonds with a face value of less than half the previous securities, longer maturities and reduced interest rates, leading to a net present value loss of more than 70 per cent. The new bonds do come with warrants that will provide extra income in years when Greek economic growth exceeds certain thresholds.

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