Tags: Greek | Bonds | Debt | Swap

Private Investors With 58% of Greek Bonds Agree to Debt Swap

Wednesday, 07 March 2012 11:20 AM

Investors with 58 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll 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 SA, Commerzbank AG and Assicurazioni Generali SpA have pledged to accept the offer. That brings the total so far to at least 120 billion euros ($157 billion), based on data compiled by Bloomberg from company reports and government statements.

The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and turn the tide against the debt crisis that has roiled Europe for more than two years. The government 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 AG head of fixed-income strategy Christoph Rieger said in a note today.

Hans Humes, president of Greylock Capital Management, expects holders of more than 80 percent of Greece’s government bonds to accede to the swap, he said in a Bloomberg Television interview today. Humes is a member of a committee of private bondholders that negotiated the deal with the government.

Pension Funds

Greece’s six largest banks, cumulatively the biggest private holders of the country’s debt, plan to accept the offer, the Finance Ministry said late yesterday. Greek pension funds with about 17 billion euros of bonds will also join, Finance Minister Evangelos Venizelos said on Real FM Radio today.

Thirty banks and insurers that were on the private creditor-investor committee for Greece plan to accept the swap, according to an e-mailed statement from the Institute of International Finance today. Those investors hold an aggregate 81 billion euros of bonds, the IIF said. The offer ends at 10 p.m. Athens time tomorrow.

Greece expects bondholders to accept the offer and is ready to force them to participate if necessary, Venizelos said in a Bloomberg Television interview in Athens this week. The government has said it wants participation above 90 percent and is seeking a minimum level of 75 percent, including with use of the collective action clauses.

Default Swaps

“I do fully expect to be part of the collective action clause,” Patrick Armstrong, managing partner at Armstrong Investment Managers in London, said today in a Bloomberg Television interview. He won’t voluntarily join in the swap because of the “minuscule” chance his bond maturing March 20 will be redeemed at face value.

Compelling holdouts to take part will likely trigger insurance contracts on the debt known as credit default swaps, analysts said.

If Greece forces bondholders to join, there “is likely be fallout in the peripheral countries, including Spain and Italy,” Marc Chandler, the head of global currency strategy at Brown Brothers Harriman in New York, said in a note. There may also be negative repercussions for financial shares, he said.

‘Turning Point’

The members of the IIF creditor-investor committee who agreed to participate are Ageas, Allianz SE, Alpha Bank SA, Axa SA, La Banque Postale, Banco Bilbao Vizcaya Argentaria SA, BNP Paribas, CNP Assurances SA, Commerzbank AG, Credit Agricole SA, Credit Foncier, DekaBank Deutsche Girozentrale, Deutsche Bank AG, Dexia SA, Emporiki Bank of Greece SA, EFG Eurobank, Generali, Greylock, Groupama SA, HSBC Holdings Plc, ING Bank, Intesa Sanpaolo SpA, KBC Groep NV, Marfin Popular Bank Plc, Metlife Inc., National Bank of Greece SA, Piraeus Bank SA, Royal Bank of Scotland Group Plc, Societe Generale SA and Unicredit SpA.

Charles Dallara, managing director of the IIF, led negotiations for private creditors in the debt-swap discussions. The Washington, D.C.-based trade group represents more than 450 financial-services companies globally.

“This will, I think, be a moment for a real turning of the page and allowing Greece to regain some economic vitality, and also I think contributing further to the overall stability and sense of confidence in the euro zone,” Dallara said in a telephone interview today.

© Copyright 2019 Bloomberg News. All rights reserved.

1Like our page
Wednesday, 07 March 2012 11:20 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved