Greece saw investors? participation in a massive debt relief deal rise on Wednesday, bringing the country closer to avoiding a default that would plunge it into financial chaos and re-ignite the European debt crisis.
About 24 hours before the deadline for acceptances, investors owning around half of Greece?s privately held debt had committed publicly to the bond swap, in which they will accept losses to avoid facing even bigger ones in the event of an outright default by Athens.
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For the deal to work ? and for Greece to secure a related 130-billion ($171-billion U.S.) bailout ? Greece needs 90 per cent of investors to sign up. However, a voluntary participation rate of around 70 per cent could be enough to force most holdouts to go along.
Greece?s financial troubles are the centre of Europe?s two-year crisis, so successfully lightening its debt load is crucial to the overall plan of keeping the 17-nation euro currency afloat. The euro EUR/USD-I and stock markets SPX-I rose on Wednesday as confidence over the bond swap grew.
The Institute of International Finance, which has been leading the debt talks for large private creditors, said firms holding 84-billion of Greek bonds have agreed to the deal. The 32 firms include 12 that declared their participation on Monday as well as all major Greek and Cypriot banks. German reinsurer Munich Re, which holds some 1.6-billion in Greek bonds, also said it will participate.
On top of that, some 14-billion in bonds owned by Greek investment funds but managed by the central bank will also agree to the swap, Finance Minister Evangelos Venizelos said. Greek officials are hopeful that funds that directly manage another 3-billion in bonds would also sign up.
After the latest announcements, officials in Athens and other European capitals sounded optimistic that they will get the necessary participation to make the deal work.
?I am very, very confident,? Jean-Claude Juncker, the Prime Minister of Luxembourg who is also the main spokesman for the euro countries, said when asked about the debt swap.
Under the deal, private creditors will swap their Greek bonds for new ones with a face value reduced by 53.5 per cent, longer repayment deadlines and lower interest rates. Overall, they will lose some 75 per cent on their bond holdings.
Greece says that despite the losses the debt swap is a good deal for investors, since they would go empty-handed if the country can?t secure the bailout package from the euro zone and the International Monetary Fund that is tied to the debt relief.
Investors holding a total of 206-billion in Greek bonds have until Thursday evening to decide whether they want to participate in the bond swap. If all of them sign up, the deal would wipe 107-billion off Greece?s 350-billion debt pile. The Greek government will announce the result of the bond swap tender no earlier than Friday morning.
At the very least, Greece needs to reach a voluntary participation rate of 66.7 per cent of investors holding 177-billion in bonds issued under Greek law. That number would allow it to force the deal onto holdouts using new legislation it passed through Parliament last month.
For some 28-billion in Greek bonds ? including 10-billion from state-owned companies ? that have been issued under foreign law, forcing investors to participate is more difficult.
In most of the foreign law bonds, 75 per cent of investors have to vote in favour of the deal to make it binding for all. However, in contrast to the Greek law bonds, the voting for the foreign law bond takes place separately for each individual issue. That means it is much easier for speculators to buy blocking majorities and derail the swap for certain bond issues.
Tags: Debt Relief
Source: http://freedom-debtrelief.org/debt-relief-greek-bond-swap-sees-more-takers/
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