Monday 22 January 2018

Greece begins talks to ensure bondholders share losses on debt


German Finance Minister Wolfgang Schaeuble. Photo: Getty Images
German Finance Minister Wolfgang Schaeuble. Photo: Getty Images

Donal O'Donovan

GREECE will today begin efforts to get bondholders to share some losses on their debt.

Greece plans to use part of its new bailout deal to "buy back" and cancel €20bn of bonds at a discount. It wants investors to swap €54bn of old debt for new bonds with a much later repayment date.

The process is set to get under way quickly, with Greek officials meeting representatives of the banking sector for talks on how to execute the so-called 'private sector involvement'.

Sources say the exchange of old bonds for new bonds could begin as early as August. Analysts reckon the swaps will mean bondholders will take a loss of about 21pc on their investments.

French bank BNP Paribas, Germany's Deutsche Bank and HSBC have been hired to manage the giant bond swaps.

All three are among a group of banks that have signed up in support of the proposals for 'private sector involvement'.

Yesterday, Standard & Poor's (S&P) became the third rating agency to cut Greek government debt after its second bailout deal was agreed a week ago. S&P cut Greece to CC from CCC and said the proposed debt restructuring would be considered a "selective default".

Bond buybacks remain contentious. This week, Finance Minister Michael Noonan said any decision on buying back Irish government bonds would be made by the European bailout funds and the European Central Bank, not by Ireland.

German Finance Minister Wolfgang Schaeuble last night told lawmakers Germany was against further bond buybacks.

Meanwhile, the debt crisis continues to lead in new directions with the IMF warning that AAA-rated France could miss a target to cut its deficit to 3pc by 2013, unless it makes deeper spending cuts. IMF president Christine Lagarde was the country's finance minister until the end of June.

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