Athens, creditor group turn up heat on Greek bondholders
Baku, March 7 (AZERTAC). Athens turned up the heat on its creditors on Tuesday as it sought to secure a bond swap that will cut its mountainous debt, while the main bondholders group warned a disorderly default would cause more than a trillion euros of damage to the euro zone.
Greek private creditors have until Thursday night to say whether they will participate in the exchange that is a key part of a bailout program to help Greece manage its wrecked finances and meet a debt repayment on March 20.
A number of the biggest bondholders are signing up but despite the dire warnings, a clutch of Greek pension funds and some foreign investors rejected the offer which will see investors lose almost three-quarters of the value of their holdings and lop about 100 billion euros off Greece's debt.
Greek banks, holding 40-45 billion euros of the sovereign bonds, will all take part in the offer, banking sources said. Athens later confirmed its six biggest banks would take part in the swap, and Italy's largest bank by assets, UniCredit, said it would participate.
Nine more major Greek bondholders, all on the IIF steering committee that helped draw up the deal, said on Monday they would support the swap.
Investors in a Swiss-law governed Greek government bond have teamed up to challenge the terms of Athens' proposed bond swap, highlighting the wave of litigation it could yet face, particularly over the minority of its debt not issued under Greek law.
Greece wants a take-up of 90 percent or more, and if it falls below that but exceeds 75 percent it is expected to use collective action clauses (CACs) to force losses on all. It could trigger CACs on Greek law bonds, which account for 177 billion euros of the total, with two-thirds acceptance.
Below that level, the deal could be off, potentially plunging the euro zone back into crisis.
Using the CACs would probably trigger payouts on bond insurance contracts (CDS) and would also increase the chance of hedge funds or other bondholders pursuing legal action.
Complicating the process is the fact that most of the bonds fall under Greek law, but the remainder are under English law.
The deadline for acceptances is 2000 GMT on Thursday, although the foreign law bondholders must hold approval meetings March 27-29 so they would settle at a later date.
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