Business World

Friday 15 November 2019

Greece extends offer of €30bn bonds buyback after €4bn shortfall

GREECE has extended its offer to buy back debt until tomorrow, seeking more bids from bondholders after falling just short of a target to retire bonds worth €30bn at a cost of just €10bn.

The buyback is designed to provide for about half of a €40bn debt relief package for Athens agreed last month by the European Union and International Monetary Fund.

Its success is crucial to ensuring Greece's debt is put back on sustainable footing and -- more immediately -- to unlocking badly-needed aid for the country.

The offer had been due to end on Friday. The debt agency extended the offer to noon tomorrow.

"The aim is to reach the €30bn target on the face value of debt to be bought back," said a government official, who declined to be named.

Greece was given €10bn to conduct the buyback. The source said the aim was to use all of it.

A senior Greek banker who spoke on condition of anonymity said Athens aimed to use the delay to get another €3-4bn worth of bonds offered for exchange.

"This will be easily covered by Greek banks, if foreign bondholders do not offer more," the banker said.

Greek banks and insurers had tendered about €10bn of bonds out of their total holdings of about €17bn, the banker said. Nearly €63bn of Greek debt held by private investors was eligible for the buyback.

Shortly before the previous Friday deadline expired, Greek banks got board approvals to offer as much as 100pc of their bondholdings to make the buyback work.

Athens had offered better-than-expected terms for the buyback to entice investors, with price ranges at a premium over market prices.

But Greek lenders had been reluctant to sell back to the government all of their bondholdings, trying to limit the future profits and interest income on their bonds they will forego.

However, they are expected to assist to ensure a successful buyback since they depend on the bailout funds that Athens stands to receive once it is completed. A big chunk of the €34.4bn of aid due will be used to recapitalise them.

Athens badly needs the aid to revive its ailing economy, which is on track for a sixth year of recession due to austerity measures including spending cuts and tax hikes.

The EU and the IMF have been withholding rescue payments to Greece for six months because it had failed on pledges to shore up its finances, privatise and make its economy more competitive.

Greece and its international lenders had shied away from setting a binding target for the buyback, apart from saying that Athens would spend a maximum of €10bn on it.

Under the scheme, Greece was expected to spend that amount to repurchase €30bn of debt, shaving it by a net €20bn. That would help slash Greece's debt to 124pc of GDP by 2020, ensuring that the IMF stays on board in the country's rescue.

Greece set December 18 as the settlement date for offers on the 20 series of outstanding bonds it is buying back.

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