Greek bond offer blocked by ministers

City A.M. Reporter
EUROZONE finance ministers have rejected an offer made by private bondholders to help restructure Greece’s debts, officials said yesterday, sending negotiators back to the drawing board and raising the threat of default.

At a meeting in Brussels to discuss Athens’ debt problems, ministers said they could not accept a coupon of four per cent on new longer-dated bonds expected to be issued to private bondholders in exchange for their existing Greek holdings.

Banks and other private institutions represented by the Institute of International Finance (IIF) want a four per cent coupon on the new bonds, which will have a face value of half that of the bonds they replace, thereby cutting Athens’ debts. Greece says the coupon must be closer to 3.5 per cent.

“The ministers have sent the offer back for negotiations,” one Eurozone official with knowledge of the talks said, indicating that the ministers had effectively come down on the Greek government’s side.

“The ministers want a lower coupon than presented in the offer [from the IIF],” the official said.

The disagreement increases the risk that it may prove impossible to strike a voluntary restructuring deal between Greece’s creditors and the Greek government.