Athens: Greece on Friday secured a high enough participation in its critical bond swap offer to drastically reduce its debt, staving off an imminent default and paving the way for the release of funds from international rescue loans.
The Finance Ministry said 85.8 percent of private investors holding its Greek-law bonds had signed up to the deal, and that it aimed to use legislation forcing the remaining holdouts to participate. It extended the deadline for holders of foreign-law bonds, of whom 69 percent have so far signed up, until March 23.
In total, it said, holders of euro172 billion in Greek- and foreign-law bonds had agreed to sign up to the deal -- translating in to an 83.49 percent overall participation level. By triggering the legislation known as collective action clauses to force holdouts to join, they will reach a participation level of 95.7 percent, or euro197 billion.
The deal aimed to slash the country's national debt by euro107 billion (USD 140 billion), with private bond holders accepting a face-value loss of 53.5 percent in exchange for new bonds with more favorable repayment terms. A total of euro206 billion out of Greece's euro368 billion national debt is in private hands.
If the swap had failed, Greece would have faced defaulting on its debts in two weeks, when it faced a large bond redemption.
Finance minsters from the 16 other countries that use the euro are to discuss the deal's results in a conference call later Friday. The Intenational Swaps and Derivatives Association said it would also meet to determine whether the deal would be deemed a so-called "credit event" -- a technical default -- which would trigger the payment of credit default swaps, which is essentially insurance against a default.
The bond swap is a radical attempt to pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. The hope is that by slashing the overall debt, the country, which is in a fifth year of recession, can gradually return to growth and eventually repay the remaining money it owes.
"I wish to express my appreciation to all of our creditors who have supported our ambitious program of reform and adjustment and who have shared the sacrifices of the Greek people in this historic endeavour," Finance Minister Evangelos Venizelos said. "With the support of our official sector and private creditors, Greece will continue implementing the measures needed to achieve the fiscal adjustments and structural reforms to which it has committed, and that will return Greece to a path of sustainable growth."
The deal was an essential part of Greece's second international bailout, and the country now hopes to start receiving funds from the euro130 billion package of rescue loans from other eurozone countries and the International Monetary Fund.
First Published: Friday, March 09, 2012, 13:46