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The latest proposal called for a coupon starting at about 3 per cent and rising to 4.5 per cent as the bond approached maturity, one banker said. Another said the average interest paid during the life of the bond would be 4.25 per cent, which he described as a rate “that the banks would be happy with”. The deal would amount to a 68 per cent loss for bondholders in net present value terms, according to people familiar with the talks.
Lucas Papademos, Greek premier, and Evangelos Venizelos, finance minister, began discussing the fresh proposal on Wednesday in Athens with Charles Dallara, managing director of the Institute of International Finance representing private sector creditors. Greece wants to wrap up at least the outline of a deal on the bond swap ahead of a meeting of eurozone finance ministers on January 23.
“There’s a bit of optimism in the air”, said one person with knowledge of the discussions. But another person close to the process cautioned: “It’s too early to say. This time last week we were very hopeful but then the deal fell through.” Officials must try to persuade all of Greece’s creditors to swap their current bond holdings voluntarily for a new package of debt that will give the country greater leeway to meet its obligations.
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