Greece launches unprecedented bond swap with private creditors

PanARMENIAN.Net - Greece on Friday, Feb 24, launched an unprecedented bond swap with private creditors to write off nearly a third of its massive debt and unlock a huge new eurozone bailout less than a month before it faces default, AFP reports.

Holders of Greek bonds were invited to exchange an aggregate value of 206 billion euros ($271 billion) in return for new 30-year maturities, EU-backed notes and Greek output-linked securities.

But Athens warned that 75 percent of eligible investors had to participate or the exercise would be called off.

"If less than 75 percent of the aggregate face amount of the bonds selected to participate are validly tendered for exchange...the (Hellenic) Republic will not proceed with any of the transactions described above," the finance ministry said in a statement posted on special purpose website www.greekbonds.gr.

And it noted that under legislation hurriedly approved on Thursday, the exchange becomes binding for bonds governed by Greek law "if at least two thirds by face amount of a quorum of these bonds...approve the proposed amendments."

The debt writedown is the greatest ever attempted, overshadowing Argentina's $82-billion default in 2002, the equivalent of 73 billion euros.

Charles Dallara, the chief of the IIF banking sector body that negotiated the swap deal with the Greek government earlier this week, hailed it as a "historical, unprecedented restructuring of sovereign debt."

"We are quite optimistic that once investors study the proposal carefully ... there will be a high take up in a voluntary fashion," he said.

First in line is a three-year Greek bond worth 14.43 billion euros that matures on March 20 and cannot be repaid by Athens if the exchange fails.

Tied to the debt write-down are 130 billion euros of new eurozone loans, after a prior EU-IMF bailout of 110 billion euros and an accompanying fiscal adjustment program failed to revive the Greek economy, now in its fifth year of recession.