Holders of Greek bonds, including Greek banks as well as foreign institutions, have agreed to sell back some 30 billion euros ($38.8) of their holdings, government officials said, meeting a target to release a series of $56.7 billion in more rescue loans from international lenders. The deadline for participation was Dec. 7 and the details are set to be announced on Dec. 10.
The Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) that is putting up the bailout, said it was conditional on Greece convincing investors to sell back the bonds at a discount big enough for the country to write down its debt by 20 billion euros ($25.4 billion) to sustain its debt management.
Under its terms, Greece will spend up to 10 billion euros ($12.7 billion) of borrowed money to buy back the 30 billion euros in bonds, but at a deep discount that reduces the debt by twice the Greek purchase price.
“The buyback went well in broad terms. The amount offered by investors was within the range expected, about 30 billion euros,” an official told Reuters on condition of anonymity. Greek banks, which hold about 17 billion euros ($21.97 billion) of bonds, said they would participate in the buyback although the government offered to exempt them and will protect them from suits by shareholders over their losses.
Foreign investors have offered between 15-16 billion euros ($19.3-$20.6 billion) worth of bonds, Greek newspapers reported. The plan came together after the government increased how much it was willing to pay, although investors will still take losses of more than 60 percent. Hedge funds, which bought Greek debt at rock-bottom prices when it was feared Greece might be forced out of the Eurozone, are expected to make a killing on their investment.
Banking sources told Kathimerini that Greece’s four main banks – National, Eurobank, Alpha and Piraeus – submitted all their bonds, with a nominal value of 11.5 billion euros, ($14.86 billion) to the buyback process. The participation of several other smaller Greek banks meant that local lenders submitted a total of 16 billion euros’ ($20.6 billion) worth of bonds. A total of 63 billion euros ($81.44 billion) of Greek papers was eligible for the buyback.
Greek banks were hoping to keep 20 to 30 percent of their bond holdings to minimize their losses. While they will a small short-term gain from the buyback as the bonds had been recorded in their books at a value of 30 percent, Greece’s four main lenders will lose 7.5 billion euros ($9.69 billion) as a result of not holding the bonds to maturity, further weakening them after a previous administration imposed 74 percent losses on investors.
Sources told Kathimerini that Greek bankers are hoping that the government will provide other ways of absorbing this cost, such as tax breaks and they are still awaiting a recapitalization of 50 billion euros ($64.3 billion) to stay solvent.
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