Greece is due to find out on Thursday night if enough of its private bondholders have agreed to take part in a debt swap designed to shave more than 100 billion euros off its debt pile and pave the way for a new bailout from the eurozone and the International Monetary Fund worth 130 billion euros.
Greek government officials appeared optimistic on Wednesday that the target Athens needs for the restructuring to go ahead would be achieved. ?We are optimistic that we will exceed the 75 percent participation threshold by far based on the data we have so far,? a Finance Ministry official who declined to be named told Reuters.
Athens needs at least 66 percent of the investors who own 177 billion euros? worth of bonds written under Greek law to take part in the swap, which will see the value of those notes cut by almost three-quarters, to ensure the restructuring can go ahead.
If over 66 percent of bondholders – in other words those holding 117 billion euros – volunteer, then Greece can enforce collective action clauses (CACs) to force the holdouts to take part.
If this takes place, another 8 billion euros held by Greek public enterprises (DEKOs) will also be submitted, taking the figure that will be reduced to 185 billion euros – or 90 percent of the total privately held debt of 206 billion euros.
Some 20 billion euros of debt is written under UK law and it remains to be seen what action Greece will take to reduce this amount.
The eurozone has asked for participation in the private sector involvement, or PSI, to reach between 95 and 100 percent in order to sign off on the new bailout. Eurozone finance ministers are due to hold a teleconference tomorrow afternoon to discuss how to proceed following the closing of the offer to Greek bondholders. If CACs apply to bonds written under Greek law, the swap is due to take place on March 12. For bonds under UK law, the swap would take longer.
The Institute of International Finance, which led the debt talks for large private creditors, said on Wednesday that firms holding 84 billion euros of Greek bonds have agreed to the deal. Three Cypriot banks, which hold almost 5 billion euros of Greek bonds, said they would participate in the restructuring. Some 14 billion euros in bonds owned by Greek pension funds but managed by the Bank of Greece would also be added to the debt relief. Another 3 billion euros of bonds held by the funds will also be put forward voluntarily.