June 3, 2011
Greek bondholders may be about to receive an offer they can’t refuse.
The European Central Bank was said to back a plan this week to persuade investors to replace maturing Greek bonds with new, longer-dated securities. The idea is modelled on the Vienna Initiative for eastern Europe in 2009. Greece, which faces a 30 billion-euro ($43 billion) funding gap next year, is locked out of markets. Its 10-year bonds yield more than 16 percent.
“I don’t know to what extent the exchange would actually be voluntary,” said Axel Botte, who helps manage about $770 billion as a strategist at Natixis Asset Management in Paris and holds short-dated Greek bonds. “I don’t know what kind of exchange would be both in the interests of the banks and would be material enough to change the debt sustainability.”
Greece was supposed to be able to fund itself on markets under the 110 billion-euro European Union and International Monetary Fund rescue last year. Moody’s Investors Service this week said Greece has a 50 percent risk of default.
The ECB holds about 50 billion euros of Greek securities, according to Andrew Sheets at Morgan Stanley (MS) in London. About 60 billion euros of Greece’s 287 billion euros of bonds mature through the end of 2012, Bloomberg data show, and are due to be paid off at par using public money.
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