Holders face bigger losses on Greek debt

Financial Times
January 21, 2012

Last-ditch talks on restructuring Greek debt have taken a twist after official creditors demanded that private bondholders take additional losses following the country’s larger economic contraction than expected last year.

Officials from the European Commission, European Central Bank and International Monetary Fund called on Friday for a lower interest rate averaging 3.5 per cent on new bonds after private bondholders had already agreed on a 4 per cent coupon, according to people close to the discussions.

The officials arrived in Athens to wrap up a medium-term fiscal programme that must be agreed alongside the debt swap before Greece can draw down funds from a second €130bn rescue package.

The Institute of International Finance, representing holders of some €200bn of Greek debt, on Saturday denied rumours the talks had stalled, saying experts from its steering committee “will be working with Greek government officials on many aspects of the PSI (private sector involvement.)”

“The elements of an unprecedented voluntary PSI are coming into place,” it said.

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