News Column

Greece Extends Deadline for Bond Buy-back

Dec. 10, 2012

Greece has extended the deadline for its debt buy-back scheme in an effort to receive additional offers from bondholders, the Public Debt Management Agency (PDMA) said Monday.

The offer would be open until Tuesday, the agency said. The deadline had originally been set for Friday.

"Holders that have not tendered so far can still take advantage of the liquidity opportunity offered by the invitation," Stelios Papodopoulos, the head of PDMA was quoted by the Greek daily Kathimerini newspaper.

The government is to spend 10 billion euros (13 billion dollars), with the programme financed by a loan from its creditors on the buy-back, offering between 30 and 40 per cent of the face value of state bonds.

The scheme is part of a broader debt relief package worth 40 billion euros, which will in turn be repaid through the sale of assets.

"Investors should bear in mind that even if Greece accepts all bonds tendered in the invitation it will continue to engage with its official sector creditors in considering further steps to put its debt on a sustainable path," Papodopoulos said.

The PDMA said that the extension of the buy-back deadline would not allow investors who have already submitted their bonds to withdraw from the process.

The government has not revealed the rate of participation so far, but Kathimerini quoted Finance Ministry sources as saying that the target of collecting about 30 billion euros worth of offers for the buy-back had been achieved.

The newspaper said hedge funds had offered about 15 to 16 billion euros by the Friday deadline while local banks contributed up to 16 billion euros.

In Brussels, Simon O'Connor, spokesman for EU Economy Commissioner Olli Rehn, expressed optimism that the rate of participation would increase with the extension.

"We've taken note of Greece's decision to extend the offer period for its debt buy-back operation until tomorrow. We are confident that there's still scope for additional tenders by domestic and international investors.

"As you know, a successful debt buy-back is an integral part of the Eurogroup agreement of November 27 and a requisite for the success of the adjustment programme," he added.

The plan, which is to be settled by December 18, is being conducted in a Dutch auction, where prices start high and then progressively fall in value.

Some 20 outstanding bonds are eligible for the auction, and the country has set a minimum range of 30.2 to 38.1 per cent of the bond's nominal value and a maximum purchase price of 32.2 to 40.1 per cent.

Athens' creditors - the European Union, European Central Bank and International Monetary Fund - hope the buy-back will help reduce national debt by 11 per cent of gross domestic product (GDP), or about 20 billion euros, according to internal documents.

"As agreed on November 27, the Eurogroup will meet on December 13, so this Thursday, to review the outcome of the debt buy-back operation and take the necessary decisions with regard to the next disbursement for Greece," said O'Connor.

The Greek government has struggled to cut its debt, which is expected to balloon to almost 190 per cent of GDP next year.

International creditors want it to be reduced to 175 per cent by 2016 and to "substantially less" than 110 per cent by 2022.

Source: Copyright 2012 dpa Deutsche Presse-Agentur GmbH

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