GREECE WARNED yesterday that it might call off a proposed €135 billion debt swap if fewer than 90 per cent of private investors sign up for the deal.
The warning came in a letter from the Athens finance ministry to 60 global governments giving details of a swap and roll-over plan agreed last month with EU partners as part of a second Greek bailout package.
Provided that 90 per cent of private sector bondholders participate in the scheme, which covers €150 billion of bonds maturing by 2020, Greece would be able to cut its public debt by €13.5 billion.
If, however, the take-up was lower “Greece shall not be obliged to proceed with any portion of the transaction”, the letter said.
A final decision would be made after consultations with official creditors – the EU and IMF – on whether the take-up was enough to “permit the official sector to support the new multi-year adjustment programme”.
Petros Christodoulou, the country’s debt manager, said the letter “is one of inquiry preparing for a voluntary liability management event later in the fall”.
Greece has set a September 9th deadline for banks and other private investors to make non-binding offers to exchange or roll over 81 eligible bond issues.
Bankers in Athens said that participation was running at about 70 per cent but could go higher as the date for executing the swap, expected to take place in early October, approached.
In an interview with the Financial Times last week, Didier Reynders, Belgium’s finance minister, said recent discussions with leading Belgian banks and insurance companies suggested that Belgian participation rates were as high as 96 per cent.
Although Mr Reynders said Belgian participation would account for only €4.9 billion of the €135 billion goal, it was a further indication that many of the bondholders sitting on the sidelines may be outside the mainstream European financial sector.
The participation rate among Greek banks and pension funds, which together hold about €80 billion of bonds, is expected to exceed 95 per cent – although the 21 per cent “haircut” that bondholders are due to take will wipe out a sizeable chunk of the banks’ capital base. – Copyright The Financial Times Limited 2011
