Private creditors agree to Greek bond swap | News | DW | 09.03.2012
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Private creditors agree to Greek bond swap

Greece has secured the participation of the overwhelming majority of its private investors in its bond swap, surpassing the crucial 75-percent mark. Athens can now force any reluctant holdouts to accept the deal.

Athens announced on Friday that 85.8 percent of its private creditors had agreed to participate in a bond swap deal that would reduce Greece's debt by 107 billion euros ($140 billion).

The Greek finance ministry said that the rate of participation in the so-called "haircut" would rise with the enforcement of controversial collective action clauses, which would force any holdouts to participate in the deal. Athens has asked bond holders to accept a 53.5 percent loss through lower face value, lower interest rates and longer maturities.

"On behalf of the Republic, I wish to express my appreciation to all of our creditors who have supported our ambitious program of reform and adjustment and who have shared the sacrifices of the Greek people in this historic endeavor," Finance Minister Evangelos Venizelos said in a statement Friday. "With the support of our official sector and private creditors, Greece will continue implementing the measures needed to achieve the fiscal adjustments and structural reforms to which it has committed, and that will return Greece to a path of sustainable growth."

Venizelos added that the deadline for holders of Greek bonds issued under foreign law - who hold a relatively small portion of the country's total debt burden - had been extended to March 23. Only 69 percent of that group has so far signed on to the debt swap.

Evangelos Venizelos

Venizelos said Greece appreciated creditors' support

The body representing private holders of Greek debt, the International Institute of Finance, also welcomed the deal. Josef Ackermann, chairman of the organization's board of directors, said that the debt swap will strengthen "the euro area's ability to create an economic environment of stability and growth."

A spokesman for German Chancellor Angela Merkel said she was "satisfied" by the "encouraging result" of the deal.

Take it or leave it

Athens has stated that total participation in excess of 90 percent would be the milestone that determined the success or failure of the deal. With more than 75 percent participation, however, the government can initiate legislation forcing non-participants to go along.

"Obviously for the majority of bondholders it does make sense to accept the deal as it is better to get something rather than nothing and if the exchange failed and Greece undertook a disorderly default then the likelihood is that nothing is close to what bondholders would recover," Gary Jenkins, managing director of Swordfish Research, told news agency AP.

Eurozone finance ministers have planned a teleconference on Friday to discuss how to proceed following the closing of the deal.

slk, dfm/acb (AFP, AP, dpa)