The Greek ministry announced the result of its bond restructuring early Friday morning. The government claimed 83% of bondholders had willingly submitted to the deal, and that it would invoke supposed collective-action clauses to force the exchange on almost all of the rest, bringing collaboration up to 96%.
Greece had estimated 206 bn. ($273 bn.) in bonds for the exchange.
Just over a hundred bln will be cut from the amount Greece owes.
While a consummated debt swap has been on the horizon for at least a weeks. The result of the debt exchange had been getting more and more clear over the previous several days, however it remains a major point for the EU Union’s common currency, and for the debt crisis that started in Greece more than 2 years back and has threatened the union ever since then.
Demonstrators raise a Greek flag in front of parliament in a rally against austerity and industrial measures and corruption in Athens ‘ Syntegra Square in June 2011.
It’s also a critical landmark for Greece, which may get some alleviation from its debt, and, crucially, secure more help from Europe. But the country is still devastated by austerity and years of recession.
Few think its economic future, at least in the shorter term, is any brighter. Greece’s debt burden now more than 160% of its annual GDP. The ECU stepped in with rescue loans and put Greece on an economic diet. Still the debt mountain grew.
EU leaders maintained for over a year that Greece would not be permitted to fail and would pay back its creditors ; then, last year, it became obvious the costs of keeping her floating were too much for the remainder of the eurozone to bear.
At first offer for a debt restructuring, in July, asked non-public creditors to forsake roughly ten percent of the face value of their holdings. As Greece’s finances deteriorated, that plan evaporated. The restructuring now set to be executed will see Greece axe 53.5% from the face value of around two hundred bln in bonds held by private creditors.
Greece’s other major creditors include its fellow euro-zone countries, which have lent 53 bill, the other international financial organizations including the IMF, which lent twenty bn., and the ECB and state central banking institutions, which acquired more than fifty bln of its bonds.
None of those loans are covered by the restructuring.
Of the 206 bn. in total instruments in private hands, 177 bn. are central authority bonds issued under the laws of Greece, about ten bln are bonds issued by state owned corporations and warranted by Greece and eighteen bln are executive bonds issued under the laws of foreign jurisdictions, where Greece’s reach is more limited.
Greece’s laws changed in February which permit the country to bind all Greek-law holders to the exchange with the acceptance of two thirds. That threshold was simply cleared, and Greece asserted all 177 bill will be pushed into the exchange. Of the foreign-law bonds, 69% accepted the exchange, as did the majority of the state-owned-company bonds. Greece stated that it would give resistant bondholders 2 weeks to switch their minds; nevertheless it implied it might play tricky. There are therefore around nine billion of bonds belonging to creditors who may challenge the exchange thru courts or settlement panels.
Bondholders who submit to the swap or are compelled to do so will get a package of instruments including money or short term bonds issued by the euro-zone rescue fund valued at 15% of the value of whatever they exchange, and a collection of Greek bonds maturing over the following eleven to thirty years priced at 31.5%. Those bonds have just started trading in a theoretical “gray market,” expounded folk acquainted with the problem. The new 30-year bond was quoted between fifteen and seventeen cents, and an 11-year bond at between twenty and twenty-two cents. Those levels imply that financiers think Greece will not meet its obligations in the future and a further rescue will be required.