Greece and its private lenders will begin talks on a bond swap to cut 50 per cent of the country's debt tomorrow in Frankfurt, a Greek newspaper claimed today.
The talks are part of an EU bailout plan for the debt-laden country agreed last month. Under the plan, about €200 billion of Greek debt owned by private bondholders would be cut by €100 billion.
Greece will propose that for every €100 Greece owes, bondholders should receive between €10 and €20 in cash, depending on the maturities of the existing bonds they hold, Kathimerini said.
Bondholders would also receive between €30 and €40 in new bonds with a duration of between 20 and 30 years at an average coupon of 6 per cent, the newspaper added.
Banks, represented by the International Institute of Finance (IIF), are likely to propose that the face value of 141 billion euros of bonds be cut by 50 per cent, Kathimerini said.
The rest would be exchanged with EFSF-guaranteed bonds expiring in 22 years at a fixed coupon of 7 per cent, or alternatively a floating coupon between 5.5 per cent and 7.5 per cent, it added.
An alternative proposal by the IIF, Kathimerini said, sets out a 37 per cent haircut on €65 billion of bonds. The remaining debt would be swapped with new, 15-year bonds at a coupon of 8 per cent.
Under both IIF proposals, the coupon would be linked to Greece's GDP, Kathimerini said.
Greece's new prime minister Lucas Papademos said yesterday that the country would publish very soon an official announcement to begin talks on the bond swap. Mr Papademos's government is expected to receive a parliamentary vote of confidence tomorrow.
Reuters
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