Greece set to impose writedown

Tim Wallace
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MOST private sector bond holders are expected to agree to swap their assets into fewer, longer-term bills by tonight’s deadline – but Greece will probably have to use new laws to force the stubborn remainder to take losses.

The arrangement is part of Greece’s €130bn (£108.5bn) bailout which aims to cut its debts from 160 per cent of GDP now to 120.5 per cent by 2020.

Dozens of major banks belonging to the Private Creditor Investment Committee for Greece (PCIC) yesterday agreed to the swap, with investments totalling €124bn, or 60 per cent of the €206bn of bonds involved.

If bondholders accounting for 66 per cent, roughly €150bn, of the total agree to the swap by today’s 8pm GMT deadline, the government can force the others to take losses too, through collective action clauses (CACs).

“The government will not reach the 95 per cent it wanted to declare the bond swap ‘voluntary,’ but it will probably get over 75 per cent of bondholders to agree,” said Raoul Ruparel, an analyst at Open Europe.

“This is the outcome everyone has worked for six months to avoid – for such a small write-down, this deal represents a lot of wasted time and effort.”

Eurozone finance ministers are expected to hold a teleconference this afternoon at which CACs will be discussed before Greece puts them into force after markets close.

The bond swap is then expected to be carried out over the weekend.