Massive take-up of Greece bond swap offer

Thu Mar 8, 2012 5:19pm EST
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By George Georgiopoulos and Lefteris Papadimas

ATHENS (Reuters) - Greece secured an overwhelming acceptance of a bond swap offer to private creditors and beat its own most optimistic forecasts, a senior official said on Thursday after the deadline expired on a deal needed to avoid a chaotic debt default.

A government official, speaking on condition of anonymity, said take-up on the offer was around 95 percent an hour before the offer closed at 2000 GMT with responses still coming in.

The biggest sovereign debt restructuring in history will see bond holders accept losses of some 74 percent on the value of their investments in a deal that will cut more than 100 billion euros from Greece's crippling public debt.

Preliminary results from the offer are expected to be announced officially at 0600 GMT on Friday and Finance Minister Evangelos Venizelos will hold a news conference before a call with euro zone finance ministers in the afternoon.

After initial fears that the deal could fail altogether, pitching Greece and the euro zone into fresh crisis, the unexpectedly strong result may mean that Athens can avoid enforcing the exchange on recalcitrant holdouts.

The government had been expected to activate so-called collective action clauses (CACs) on all 177 billion euros worth of bonds regulated under Greek law.

That would potentially trigger payouts on the credit default swaps (CDS) that some investors held on the bonds, an event which would have unknown consequences for the market.

The private sector involvement (PSI) deal is a key element in a broader international bailout aimed at averting a chaotic default by Greece and a potentially disastrous banking crisis across the euro zone.   Continued...

Police officers shout slogans as they protest against their pension fund's participation in the Greek bond swap in Athens March 7, 2012. Greece faces a Thursday deadline for a debt restructuring deal with private investors that is crucial to its new 130 billion euro ($172 billion) bailout package needed to avoid a chaotic default. REUTERS/John Kolesidis