Bondholders warn on Greek deal

Financial Times
October 17, 2011

Eurozone banks are raising the threat of being nationalised in an effort to fend off suffering losses of up to 50 per cent on their Greek bonds should the terms of Greece’s bail-out be redrawn.

People close to holders of Greek debt said a compromise of a reduction of 35-40 per cent of net present value, up from the current 21 per cent, was possible.

But they warned that increasing the proposed haircut, or losses, on the bonds to 50 per cent could force eurozone governments to take stakes in a number of institutions. “If you go too far, the banks could be nationalised. It probably moves the threshold of what banks would put up with,” said one person familiar with the talks.

The potential losses for holders of Greek bonds has become one of the most controversial issues to be discussed by EU leaders at a summit this weekend.

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