The deadline for Greek bondholders to agree to a voluntary debt restructuring scheme passed on Thursday night and the government is expected to announce on Friday morning that well over 75 percent of investors will take part in the swap.
Government officials remained tight-lipped over the participation rate of investors who hold 177 billion euros of bonds written under Greek law but momentum appeared to build throughout the day.
?I look forward to maximum participation by the private sector, which will contribute significantly to the effort to adjust and restore our economy,? Prime Minister Lucas Papademos said during a cabinet meeting.
Charles Dallara, head of the Institute of International Finance (IIF), which has been negotiating on behalf of large private creditors, said he believed the participation would likely be ?very, very high.?
Athens needed at least 66 percent of those holding bonds written under Greek law to take part in the deal. This would allow it to effect collective action clauses (CACs) imposing losses on the holdouts as well.
Friday?s announcement will not be the end of PSI for Greece as there is still the issue of some 18 billion euros of Greek bonds under other countries? laws to settle. This amount accounts for 8.7 percent of the total privately held debt of 205 billion euros that Greece is seeking to restructure.
The bonds are written under UK, Swiss, Japanese, US and French law. Holders of these notes will have until April 11 to swap them. Greece?s public enterprises (DEKOs) also hold 3 billion euros of these bonds.
Greece has the option of either not paying these bonds at all or subjecting them to a greater haircut than the one for bonds written under Greek law. Whichever option Greece chooses, it is likely to face legal challenges from the investors who hold these notes.
The decision over which course to take is likely to depend on the participation rate in yesterday?s debt swap. Greece needs to have an overall participation rate between 95 and 100 percent to satisfy the eurozone and the IMF that it is on its way to making its debt sustainable. If today?s announcement reveals a lower participation rate than desired, Greece could have to default on the bonds that are written under foreign law.
Papademos described as ?shortsighted? the decision of some pension funds not to take part in PSI. Seven pension funds holding about 3 billion euros agreed to join the scheme but six funds with some 3.5 billion euros refused to accept a haircut.