26.8.2011
By Simon Miller
Greece has threated to opt out of a debt swap if too few investors rally behind it.
The swap, which is crucial for Greece’s second bailout, aims to take €37bn out of its €150bn (£131bn) existing debt but Greece has now insisted that 90% of private sector investors agree to the deal or it may opt out of the deal.
With between 60% and 70% of bondholders already agreed to the haircut, according to the Institute of International Finance, the hardening stance is thought to be challenging debt holders to either accept a true default or the haircut.
Greece is aiming to get investors holding about 135 billion euros to participate, out of the roughly 150 billion euros of bonds maturing by 2020.
The letter setting out the conditions was meant as an invitation to banks to declare their non-binding interest to take part in the bond swap by 9 September according to Reuters.
The news agency said Friday's letter provided further details of the four options available to investors, including three offers for a debt exchange offers and one for a rollover into debt of up to 30-year maturity, as well as a bond buyback scheme.
The letter said: "Greece shall not be obliged to proceed with any portion of the transaction described in this letter unless holders of eligible GGBs tender, in response to Greece’s eventual Invitation to Tender, eligible GGBs having a principal amount equal to not less than 90% of all eligible GGBs, including 90% of that portion of the eligible GGBs maturing during the period from June 30, 2011 through August 31, 2014.”
It added: “If these thresholds (or either of them) are not met, Greece shall not proceed with any portion of the transaction described in this letter if it determines, in consultation with the official sector, that the total contribution of private sector creditors towards the financing needs of Greece and Greece’s debt sustainability resulting from this transaction is insufficient to permit the official sector to support the new multi-year adjustment program for Greece announced on July 21, 2011."
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