Greece surprises with bond buyback offer | Business| Economy and finance news from a German perspective | DW | 03.12.2012
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Greece surprises with bond buyback offer

Athens has unveiled details of an offer to buy back some of its old bonds in eurozone-supported efforts to lower Greece's huge debt burden. The prices set are above market value to the surprise of many investors.

The price ranges set by the Greek Public Debt Management Agency Monday vary from a minimum of 30 to 38 percent of the nominal bond value to 32 to 40 percent depending on the debt's maturities.

This means that private investors who had once bought Greek government bonds for a nominal 100 euros ($130) are offered between 30 and 40 euros. The prices offered are higher than the current market prices for Greek debt, which on Friday traded between 25 to 34 percent.

The offer is higher than expected by analysts, although some of them are still skeptical about whether the buyback will be successful.

"My doubts are whether they'll be high enough to encourage a high participation rate," HIS Global Insight analyst Diego Iscaro told Reuters news agency.

The buyback will be conducted in a so-called Dutch auction, meaning the Greek government wants to induce an element of competition for the lowest price. If a bondholder tries to get a price close to the upper limit there is a risk of losing out in the case that the buyback limit is filled at a lower price.

Greece wanted to spend about 10 billion euros on the program, hoping to buy back government debt worth 63 billion euros nominally, the debt management agency said Monday.

Investors needed to declare their interest by December 7, with the expected settlement date set for December 17, it added.

The bond buyback will be carried out with funds provided under a eurozone bailout package, and comes as part of a series of efforts by the European Union and the International Monetary Fund (IMF) to help Greece reduce its debt burden.

The plan is for Greece to be able to reduce its sovereign debt to 124 percent by 2020, after the country's mountain of debt is scheduled to peak at 191 percent in 2014.

uhe/kms (Reuters, dpa, AP)