Craig Eisele on …..

March 5, 2012

Greece Ready to Strong Arm on Debt Swap

Filed under: Uncategorized — Mr. Craig @ 9:15 pm

Greece expects bondholders to accept a one-time offer to write off about 100 billion euros ($140 billion) of Greek debt and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said.

“This is the best offer,” Venizelos said in a Bloomberg Television interview with Nicole Itano in Athens today. “This is the best offer because this is the only one, the only existing offer.”

The European Union is facing its first test in its attempt to turn the page on the two-year debt crisis as Greece’s private creditors decide whether to sign off on the biggest sovereign- debt restructuring in history. The success of the 106 billion- euro swap, confirmed on the eve of last week’s European Union summit, depends on how many investors agree to the writedown by the March 8 deadline.

“This is the critical week,” Venizelos said.

Twelve banks and investors, including National Bank of Greece SA (ETE), BNP Paribas (BNP), Commerzbank AG (CBK) and Deutsche Bank AG, said today they planned to take up the offer, according to an e- mailed statement from the Institute of International Finance. At the same time, Germany’s DSW investor protection group advised private sector bondholders to reject the Greek bond offer.

Participation Rate

The Greek government has set a 75 percent participation rate as a threshold for proceeding with the transaction, in which investors will forgive 53.5 percent of their principal and exchange their remaining holdings for new Greek government bonds and notes from the European Financial Stability Facility. Euro- area finance ministers last week authorized the EFSF to issue bonds for the swap.

Erik Nielsen, chief global economist at UniCredit SpA in London, said enough creditors will probably participate in the writedown to avoid triggering so-called collective action clauses, which could be used by Greece to compel investors to participate and roil markets by triggering credit-default swap insurance contracts.

“If we can avoid the triggering of CDSs this is the best solution,” said Venizelos. “With a near universal participation it’s not necessary to activate CACs. But this clause exists in our legal order and we are ready to implement the legislation if necessary.”

Euro-area finance ministers will hold a teleconference on March 9 to review the deal’s outcome.

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