Outlook positive for bond swap

The outlook for the successful completion of the government?s bond swap with private investors was good on Thursday as reports indicated that an increasing number of major banks and pension funds were throwing their weight behind the exchange which would clear the way for additional crucial rescue funding.

Investors with about 60 percent of the Greek bonds eligible for the nation?s debt swap have so far indicated they will participate, putting the country on the verge of the biggest sovereign restructuring in history, Bloomberg reported on Thursday.

Government officials appeared increasingly confident that the exchange would go through.

“The pace of responses to the bond offer is good, the percentage of bondholders tendering voluntarily is very high,» a government official, who spoke on condition of anonymity, told Reuters. «It is going well, we are optimistic,» he said.

A senior Greek finance ministry official told Reuters the government was hopeful 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.

Some hedge funds and several Greek pension funds were holding out but the high level of acceptances well before the deadline suggested that the deal was progressing smoothly despite initial warnings of a low take-up.

The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and turn the tide against the debt crisis that has roiled Europe for more than two years. While Greece would prefer a voluntary deal, the government has said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so-called private sector involvement falls short and it gets sufficient approval from investors to change the bonds? terms.

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.

It is expected that Greek authorities will announce the results of the PSI at around 8 a.m. local time on Friday.

Eurozone finance ministers are due to hold a teleconference later on Friday 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.

[Combined reports from Reuters, Bloomberg]

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