Greece launches bond buyback to cut debt
Source: Bloomberg News |
December 4, 2012, Tuesday
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Print Edition
Print Edition
GREECE offered to spend 10 billion euros (US$13 billion) buying back bonds issued in a record restructuring as the nation attempts to cut a debt load that may threaten future international aid.
Greece asked investors to tender bonds in a so-called modified Dutch auction, the Athens-based Public Debt Management Agency said in a statement yesterday. PDMA offered an average maximum purchase price for the bonds maturing from 2023 to 2042 of 34.1 percent, based on information in the statement. The offer runs until 5pm London time on Friday.
The offer is part of a package of measures approved by euro-area finance ministers last week to cut the nation's debt to 124 percent of gross domestic product in 2020 from the 190 percent it was projected to reach in 2014. Success of the buyback is key to releasing aid that's been frozen since June. Greek bonds rose for a third day, pushing the 10-year yield below 15 percent for the first time since the nation's debt was restructured in March.
The likelihood is "pretty high" that Greece will complete the entire buyback, Peter Schaffrik, head of European rates strategy at RBC, said. Greek banks and some hedge funds are likely to join in, he said.
The yield on the 2 percent securities maturing in February 2023 fell 151 basis points, or 1.51 percentage points, to 14.63 percent at 9:45am London time yesterday, leaving the price at 39.31 percent of face value.
Investors who agree to join the buyback will receive payment in six-month notes of the European Financial Stability Facility, the debt agency said.
The IMF has set the 2020 debt-reduction target as a condition for continuing to fund a third of Greece's bailout program. International Monetary Fund Managing Director Christine Lagarde said after the euro-area finance ministers' meeting in Brussels that the fund will examine the results of the buyback before deciding whether to approve disbursement of additional aid.
Greece asked investors to tender bonds in a so-called modified Dutch auction, the Athens-based Public Debt Management Agency said in a statement yesterday. PDMA offered an average maximum purchase price for the bonds maturing from 2023 to 2042 of 34.1 percent, based on information in the statement. The offer runs until 5pm London time on Friday.
The offer is part of a package of measures approved by euro-area finance ministers last week to cut the nation's debt to 124 percent of gross domestic product in 2020 from the 190 percent it was projected to reach in 2014. Success of the buyback is key to releasing aid that's been frozen since June. Greek bonds rose for a third day, pushing the 10-year yield below 15 percent for the first time since the nation's debt was restructured in March.
The likelihood is "pretty high" that Greece will complete the entire buyback, Peter Schaffrik, head of European rates strategy at RBC, said. Greek banks and some hedge funds are likely to join in, he said.
The yield on the 2 percent securities maturing in February 2023 fell 151 basis points, or 1.51 percentage points, to 14.63 percent at 9:45am London time yesterday, leaving the price at 39.31 percent of face value.
Investors who agree to join the buyback will receive payment in six-month notes of the European Financial Stability Facility, the debt agency said.
The IMF has set the 2020 debt-reduction target as a condition for continuing to fund a third of Greece's bailout program. International Monetary Fund Managing Director Christine Lagarde said after the euro-area finance ministers' meeting in Brussels that the fund will examine the results of the buyback before deciding whether to approve disbursement of additional aid.
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