Greek bond swap prospects lifted by fresh pledges

Wed Mar 7, 2012 2:21pm EST
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By Lefteris Papadimas

ATHENS (Reuters) - Major banks and pension funds threw their weight behind Greece's bond swap offer to private creditors on Wednesday, making it increasingly likely that the deal will pass and clear the way for a bailout package to avert an immediate default on its debt.

A group of banks and funds representing 40.8 percent of Greece's 206 billion euros of outstanding debt said they would take part in the deal, joining other Greek and foreign banks and pension funds which have already pledged to accept the offer.

A senior Greek finance ministry official told Reuters the government was now optimistic that well over 75 percent of eligible bonds would be submitted, easily clearing the original minimum threshold it had set for the deal to proceed.

In total, bank, insurers and pension funds holding bonds worth around 120 billion euros have already declared they will take part. Some hedge funds and several Greek pension funds were holding out against the deal.

The European Union and International Monetary Fund have made a successful bond swap a pre-condition for final approval of the 130 billion euro ($170 billion) bailout agreed last month and ministers will decide on whether to clear the package in a conference call on Friday afternoon.

Athens, totally reliant on international support to stave off a default that could set off a severe banking crisis across the euro zone, has asked its private sector creditors to accept steep losses on their Greek bond holdings.

Investors are being asked to give up almost three quarters of the value of their holdings in return for new Greek bonds in a bid to cut a public debt burden that amounts to around 160 percent of Greece's gross domestic product.

Provided it reaches a two thirds threshold of those who respond to the offer, Athens has said it will impose collective action clauses (CAC) that would allow it to impose the deal on all its bond holders. It has warned that it will pay nothing to investors who refuse to sign up.   Continued...

A woman walks inside a hall of the Athens Stock Exchange in Athens January 23, 2012.   REUTERS/John Kolesidis