Greece plans reopening debt buyback invitations

December 10, 2012 - 12:22:33 am

ATHENS: Greece may ask for additional offers from bondholders in a debt buyback plan that forms part of its international bailout, Greek officials said yesterday.

The invitation might be renewed today to top up the offers already received, three officials close to the proceedings said. “It’s possible,” a senior government official said on condition of anonymity.

Another government official and a banker confirmed the move was under consideration.

Athens plans to buy back bonds with a face value of about 30 billion euros at deeply discounted prices to lower its debt load. A deadline for bondholders to submit offers expired on Friday. A Greek government official said on Saturday that Athens had received offers of about that sum. 

The officials’ comments confirm a report earlier yesterday by television station Mega, which said that Athens was very close to hitting the ¤30bn mark and that it might renew the invitation for a short period to collect additional bids from Greek banks on standby to provide them.

By Friday Greece received offers for at least ¤15-16bn from foreign investors and about ¤10-11bn from Greek banks, Mega said.

Greek banks, which hold about ¤17bn of bonds, said on Friday they would participate in the deal but did not reveal how many of their bonds they were willing to exchange. Their boards authorised management on Friday to offer up to 100 percent of lenders’ bondholdings.

The buyback accounts for about half of a ¤40bn EU/IMF debt relief package for Athens agreed in November. Its success will ensure that the IMF, which contributes about a third of Greece’s bailout loans, will stay on board of the rescue. 

Greece and its international lenders have shied from setting a binding target for the plan, apart from saying that Athens should spend at most ¤10bn on it. Officials said the aim was to purchase about ¤30bn of debt, thus reducing Greece’s debt load by a net ¤20bn.

Greek bankers had been reluctant to take part in the scheme, for fear of foregoing future profits on their Greek bonds.

However, they have to make sure it succeeds because they depend on the bailout funds that Athens stands to receive if the buyback succeeds and its bailout to continue smoothly.

Almost ¤24bn from the ¤34.4bn Greece stands to receive from its lenders later this month will be used to refloat Greek banks, whose capital has been largely depleted by the country’s debt crisis. Another source said that Greece might have secured additional financing from its lenders for the plan and could be re-opening it to attract additional interest from foreign bondholders.

“In the knowledge that the buyback will succeed, investors might be willing to increase their offers,” he said.