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Greece's bondholders back deal to halve value of debt

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Greece's Finince
Minister Evangelos
Venizelos talks during
a conference in Athens.

Greece's Finince Minister Evangelos Venizelos talks during a conference in Athens.

Greece's Finance Minister Evangelos Venizelos (L) talks with Ireland's Finance Minister Michael Noonan (R) at a Eurogroup meeting ahead of a two-day EU leaders summit in Brussels.

Greece's Finance Minister Evangelos Venizelos (L) talks with Ireland's Finance Minister Michael Noonan (R) at a Eurogroup meeting ahead of a two-day EU leaders summit in Brussels.

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Greece's Finince Minister Evangelos Venizelos talks during a conference in Athens.

GREECE'S major bondholders voiced their support yesterday for a deal that would halve the value of their debt holdings and aims to put the country back on a sustainable debt-repayment footing.

The steering committee of the Institute of International Finance (IIF), which includes a dozen major investors in Greek bonds and helped draw up a deal agreed last month, said it would accept the offer.

Greece and its creditors are in the final stages of talks aimed at a deal that would cancel more than €100bn of its debts. Private lenders, mainly banks, insurers and investment institutions, have to reveal their intentions with regard to the deal by Thursday night.

About a quarter of privately-held Greek debt is estimated by industry sources to be in the hands of hedge funds, which are not represented by the IIF committee.

The latest move is seen as an attempt to build up momentum before the deadline, and follows weekend comments from the IIF that it was confident the bond swap deal would complete successfully this week.

The IIF has refused to estimate how much of Greece's €206bn the steering committee holds, but it is likely to be about €90bn. The steering committee includes banks, insurers, asset managers and hedge funds like BNP Paribas, Deutsche Bank, National Bank of Greece, Allianz and Greylock Capital Management.

Under the deal agreed with eurozone officials and the IMF last month, government debt holders are being asked to swap their old bonds for a package of new English law Greek bonds and securities issued by Europe's rescue fund.

They must write off 53.5pc of the nominal value of their debt, and effectively lose about 74pc of their investment value after taking into account future interest payments.

Meanwhile, bank deposits in Greece have fallen by €70bn since 2009, an indication of the massive loss of confidence in the economy as it repeatedly came close to bankruptcy.

Finance Minister Evangelos Venizelos said only €16bn of the funds withdrawn from Greek banks was sent abroad, mostly to the UK. The rest has been largely spent as families and businesses eat into savings, or hoarded by households preparing for a debt default or Greece's exit from the euro.

Irish Independent