Greece debt swap talks drag into weekend

Sat Jan 21, 2012 5:10am EST
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By Lefteris Papadimas and Harry Papachristou

ATHENS (Reuters) - Greece and its creditors are continuing negotiations on a debt swap on Saturday after late-night talks edged them closer to a vital deal but failed to clinch an agreement.

Athens is anxious to strike a deal before a meeting on Monday of euro zone finance ministers, just in time to set in motion the paperwork and approvals necessary to receive a new injection of aid to avoid a messy bankruptcy in March.

"The elements of an unprecedented voluntary PSI are coming into place," the Institute of International Finance said in a statement after Friday's three-hour evening negotiation session, referring to the bond swap scheme.

"Now is the time to act decisively and seize the opportunity to finalize this historic deal and contribute to the economic stability of Greece, the euro area and the world economy."

The statement seemed to be addressing Greece's official lenders, the EU and the IMF, who have driven a hard bargain behind the scenes of the negotiations, insisting that the deal must slash Greece's debt substantially, sources in Athens said.

IIF chief Charles Dallara, who negotiates in the name of the private bondholders, will resume talks with senior Greek officials on Saturday. No time was set yet for the meeting.

"We will not know anything for sure before Monday," said a banking source close to the talks. "The euro zone ministers will examine the proposal and say whether we have a deal. If they say we don't, we're back to the negotiating table."

Private bondholders will likely take a hit of 65 to 70 percent on their holdings, with Greece's new bonds featuring 30-year maturity and a progressive coupon, or interest rate, averaging out at 4 percent, another banking official close to the talks told Reuters.   Continued...