Greece and its private creditors said they expect to complete a debt-swap accord this week, after bondholders signaled they would accept European government demands for lower interest rates.
The sides are “close” to completing a voluntary exchange within a framework outlined by Luxembourg Prime Minister Jean-Claude Juncker, the Institute of International Finance (IIF), negotiating on behalf of private creditors, said in an e-mailed statement in Athens on Saturday.
Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet.
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Juncker, who also leads the group of euro-area finance ministers, said on Jan. 24 that bonds issued in the swap should have a coupon “well below” 3.5 percent for the period to 2020 and below 4 percent over 30 years. As recently as Monday last week, private investors wanted the new 30-year bonds to have an average coupon of about 4.25 percent, two people familiar with the talks said then. That offer equated to a loss of about 69 percent on the net-present value of Greek debt.
Bondholders agreed with European officials three months ago to implement a 50 percent cut in the face value of more than 200 billion euros (US$263 billion) of debt by voluntarily swapping bonds for new securities. A worsening economy since then has made it more difficult to achieve a goal of cutting Greece’s debt to 120 percent of GDP by 2020.
An accord with bondholders is tied to a 130 billion euro, second bailout from Greece’s European partners and the IMF for the country, which faces a 14.5 billion euro bond payment on March 20.
“Further progress was made, building on the understandings reached Jan. 27 on the key legal and technical issues,” the IIF said in its statement on Saturday.
It said it expects the deal to be finished this week “as discussions on other matters move forward,” in a reference to Greek government talks with the so-called troika of the EU, the IMF and the European Central Bank about steps required for the disbursement of the second bailout.
Private investors hold about 60 percent of Greece’s 350 billion euros of debt. The IIF is an industry group with more than 450 members.
Greek Finance Minister Evangelos Venizelos separately said on Saturday that a final debt-swap pact will be concluded this week.
The next several days will shape Greece for the next decade, Venizelos said.
In addition to the debt swap, “We have labor, structural reforms and pension issues to resolve,” he told reporters in Athens late on Saturday after meeting with troika officials.
“There must be a national pact forged with unions and employers,” he said.
Greek Prime Minister Lucas Papademos yesterday was scheduled to meet the leaders of Greece’s political parties to discuss the second bailout, ahead of a summit of EU leaders in Brussels today.
Greece now requires 145 billion euros for the second bailout, 15 billion euros more than was agreed in October last year, Der Spiegel reported on Saturday, citing an unidentified official from the troika in Greece.
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