ECONOMY

SocGen, Generali take part in Greece debt swap

Societe Generale SA (GLE), France?s second-biggest bank, Assicurazioni Generali SpA and UniCredit SpA (UCG) joined firms saying they would participate in Greece?s debt swap as the country threatened to compel holdouts to take part.

Greece?s six largest banks also plan to accept the offer, the country?s Finance Ministry said in a statement late on Tuesday. The lenders are among the biggest private holders of the nation?s sovereign debt, data compiled by Bloomberg show, making them crucial to the success of the exchange.

The Greek government, which set a 75 percent participation rate as a threshold for proceeding with the transaction, said it will use collective action clauses to force holders of Greek-law bonds to accept the swap if it receives sufficient consent from investors. The goal of the exchange, which runs through March 8, is to reduce the 206 billion euros ($270 billion) of privately held Greek debt by 53.5 percent, helping avert a disorderly default that could roil markets and fuel contagion.

?It?s in the interest of the private creditors as well as international stability,? French European Affairs Minister Jean Leonetti said on Tuesday in an interview in Paris. ?All private creditors know it?s better to lose a little to win a lot rather than lose a lot later and win nothing.?

Trieste-based Generali, Italy?s largest insurer, held Greek bonds with a nominal value of about 2.95 billion euros at the end of September, while UniCredit of Milan had 540 million euros of Greek bonds on that date, company reports show. Societe Generale had 1.06 billion euros of Greek sovereign bonds as of December 31. Spokeswomen for the companies confirmed that they plan to participate in the swap.

European officials are pressing investors to swallow net present value losses of more than 70 percent to avert the even greater hit that would result from an uncontrolled default. A second rescue package, a 130 billion-euro bailout, depends on the exchange?s outcome.

If the swap fails, ?the official sector will not finance Greece?s economic program and Greece will need to restructure its debt? on different terms from those set out in the current proposal, the Greek Finance Ministry said in a statement on Tuesday. Petros Christodoulou, the director general of the Public Debt Management Agency, outlined the country?s debt swap at a meeting in Frankfurt, according to the statement.

Greece expects bondholders to accept the offer and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said in a Bloomberg Television interview in Athens this week. Compelling holdouts to take part in the swap will likely trigger insurance contracts on the debt known as credit default swaps, analysts said.

If Greece uses collective action clauses, there ?is likely be fallout in the peripheral countries, including Spain and Italy,? Marc Chandler, the head of global currency strategy at Brown Brothers Harriman in New York, said in a note. There may also be negative repercussions for financial shares, he said.

The Bloomberg Europe Banks and Financial Services Index fell for a second day on Tuesday, posting its biggest decline in four months, led by Commerzbank (CBK) AG and Societe Generale.

Three of the largest Greek banks — National Bank of Greece SA, Alpha Bank SA (ALPHA) and EFG Eurobank Ergasias — had already signalled they would participate in the debt swap. Now Piraeus Bank SA, Agricultural Bank of Greece and TT Hellenic Postbank SA have signed on, according to the Finance Ministry.

Twelve members of the creditors? steering committee that negotiated the debt swap with Greece will join in the exchange, according to a March 5 statement from the International Institute of Finance, which represents more than 450 financial- services companies globally. Charles Dallara, managing director of the Washington, DC-based IIF, led negotiations for private creditors in the debt-swap discussions.

Those firms, which include BNP Paribas SA (BNP), Deutsche Bank AG (DBK) and Commerzbank, hold Greek government bonds with a face value of at least 40 billion euros, according to data compiled by Bloomberg from the companies and their reports.

Allianz SE, Axa SA (CS), CNP Assurances (CNP) SA, EFG Eurobank Ergasias SA (EUROB), Greylock Capital Management, ING Bank (INGA) and Intesa Sanpaolo SpA (ISP), National Bank of Greece and Alpha Bank are the other members of the creditors? steering committee that plan to accept the swap, according to the statement from the IIF.

Rabobank Groep plans to participate, Chief Financial Officer Bert Bruggink said by e-mail. The Utrecht, Netherlands- based company had Greek bonds with a market value of 49 million euros after writing them down by 72 percent. Banco BPI SA also plans to take part, an official at Portugal?s fifth-biggest bank said in a telephone interview. [Bloomberg]