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Greece agrees to buy back nearly US$42b of debt
Source: Agencies |
December 13, 2012, Thursday
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GREECE will buy back 31.9 billion euros (US$41.5 billion) of its bonds from private investors at a third of their nominal price, the debt management agency said yesterday, lightening its crushing debt load and meeting a key condition to receive vital rescue loans.
The agency said in a statement that it would pay banks, funds and other private bondholders roughly 33.8 percent of the bonds' face value.
That is still a highly attractive option, as the bonds have been trading well below face value since a major debt writedown in March. Investors brave enough to have bought Greek debt just a few months ago now stand to make 200 percent gains.
The agreement will shave some 20 billion euros off Greece's 340-billion-euro debt, which is now mostly held by its bailout creditors - its European partners and the International Monetary Fund.
The yield on Greek 10-year bonds fell to about 12.6 percent yesterday, its lowest since the March writeoff and a sign of greater investor confidence in the country's ability to manage its debt.
The government had no immediate comment on the result of the deal, saying it would await a meeting today of European finance ministers, who must sign off on the buyback.
Under the terms of the buyback, Greece would spend 11.3 billion euros of its bailout funds on the bonds - more than the 10 billion euros initially budgeted. So the key question is whether bailout creditors will accept the extra outlay.
The successful buyback deal was a major requirement before Greece could be granted a long-delayed installment of its international bailout funds. Athens expects today's meeting to approve payment of the 34.4 billion euros, most of which is earmarked to shore up the country's struggling banks.
The agency said in a statement that it would pay banks, funds and other private bondholders roughly 33.8 percent of the bonds' face value.
That is still a highly attractive option, as the bonds have been trading well below face value since a major debt writedown in March. Investors brave enough to have bought Greek debt just a few months ago now stand to make 200 percent gains.
The agreement will shave some 20 billion euros off Greece's 340-billion-euro debt, which is now mostly held by its bailout creditors - its European partners and the International Monetary Fund.
The yield on Greek 10-year bonds fell to about 12.6 percent yesterday, its lowest since the March writeoff and a sign of greater investor confidence in the country's ability to manage its debt.
The government had no immediate comment on the result of the deal, saying it would await a meeting today of European finance ministers, who must sign off on the buyback.
Under the terms of the buyback, Greece would spend 11.3 billion euros of its bailout funds on the bonds - more than the 10 billion euros initially budgeted. So the key question is whether bailout creditors will accept the extra outlay.
The successful buyback deal was a major requirement before Greece could be granted a long-delayed installment of its international bailout funds. Athens expects today's meeting to approve payment of the 34.4 billion euros, most of which is earmarked to shore up the country's struggling banks.
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