Financial Times
February 21, 2012
After months of negotiations, the public and private sector finally came together in the early hours of Tuesday morning to announce a comprehensive refinancing package for Greece.
But the private sector element of the deal – involving a voluntary writedown of 53.5 per cent of the €206bn of Greek sovereign bonds held by banks and other financial institutions, and a slashing of future interest rates payable on replacement bonds – is still far from secure.
The terms are tougher than the earlier blueprint drawn up in October, which involved a 50 per cent “haircut” and a less severe reduction of interest rates. The new deal, which would see the creation of €96bn of new bonds, cuts coupons to 2 per cent up to 2015, 3 per cent up to 2021, and 4.3 per cent thereafter. Overall, the restructuring represents a 75 per cent decrease in the “net present value” of Greek sovereign bond holdings. The question now is whether bondholders will volunteer to take part.
The deal has the support of the Institute of International Finance, which has fronted negotiations. But the banks and other financial services groups that the IIF represents have shrunk in number substantially over the months that the talks have dragged on. “The banking community has probably sold down its holdings by 30 or 40 per cent,” said one senior banker.
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