Greece’s debt holders unveil exchange deal
PRIVATE holders of Greece’s debt finally agreed a proposal for a bond swap with the stricken country yesterday, which will see the value of their bonds written down by over 70 per cent.
The Institute of International Finance (IIF), which represents 32 Greek creditors, unveiled the outlines of a deal yesterday that they said could knock €107bn (£89bn) off Greece’s €340bn debt pile.
If Athens and Greece’s creditors sign up, the deal would see a 53.5 per cent haircut on the up-front value of the bonds in addition to changes in their interest payments that would effectively bring their net present value down by just over 70 per cent.
Those changes include creditors receiving new long-term Greek bonds equivalent to 31.5 per cent of the principal value of their current holdings and short-dated bonds issued by the Eurozone bailout fund, the European Financial Stability Facility, equal in value to 15 per cent of the principal.
Greece must now thrash out the terms and conditions of the deal. Crucially, Athens will have to decide whether and how to force the deal on private creditors who do not want to participate by introducing retrospective collective action clauses on its debt.
Having previously said that 95 per cent of creditors would have to agree in order for the deal to be imposed on the remainder, Greece is now reported to be considering a much lower threshold of 66 per cent acceptance in order to coerce the other third.
The IIF says its members represent “more than half” of Greece’s private debt-holders, but is not sure how many will sign up voluntarily.
The deal must also be hastily ratified by 17 Eurozone states in order to avoid a disorderly default by Greece on 20 March, when €14.5bn in bonds come due. The deadline is extremely tight: equivalent deals in the private sector are normally executed over a period of at least a month.