The process of swapping 20 bonds stemming from the Greek debt restructuring of 2012, or private sector involvement (PSI), began on Wednesday with the issue of new securities.
In a statement on Wednesday the Public Debt Management Agency (PDMA) invited private bondholders to exchange those 20 bond series for five new issues before November 28. The book will remain open for longer than usual due to the technical complexities of the procedure.
PDMA said that the aim is for the Greek yield curve to revert “back to normal and to supply the market with a limited series of securities that are expected to have significantly greater liquidity than the existing series.”
It also explained that the objective of this redistribution is to “concentrate the debt in fewer and more marketable issues while allowing thousands of depositors who have been trapped in these issues since 2012 to liquidate their portfolios if they so desire with greater ease.”
Kathimerini understands that the country’s debt will not increase as a result of the bond swap, and it is estimated that 65 percent of the entire issue has already been covered.
Another key objective of the issue is to create a market for the European Central Bank to be able to acquire bonds from when it classifies Greek paper as eligible for the quantitative easing (QE) program that will be completed in the fall of 2018.
It is also clear that this swap – despite its large size – does not concern any new money. Fresh money from investors is expected to be drawn to the next bond issue, which is anticipated in early 2018, provided the third bailout review has been completed by then.
Reuters reported that the Greek social security funds that hold 6 billion euros’ worth of bonds will take part in the swap, citing a source from the Bank of Greece.
It appears that about 60 percent of the debt to be swapped is held by foreign hedge funds and the rest by Greek bondholders, such as the Common Fund of the Bank of Greece, the Greek social security funds, private bondholders and the local lenders, which are estimated to hold some 3 billion euros’ worth of bonds.