Greek debt swap take-up 'below target'

Private sector participation in a Greek debt swap has so far reached the 75 per cent mark, far below a 90 per cent target, newspaper Imerisia reported today without naming its sources.

Greece last month turned the screws on investors, saying it may not go ahead with the debt swap - a key part in a second bailout package to stave off the country's bankruptcy - if holders of less than 90 per cent of the bonds take part.

The International Institute of Finance (IIF), a global banking group that is leading the bond swap talks, said yesterday it was confident the plan would eventually garner the necessary investor support.

A Greek finance ministry official said it was too early to provide a take-up figure. "The process is ongoing, it is premature to give a percentage," the official told Reuters on condition of anonymity.

Greece has asked bondholders to declare their interest in taking part in the debt swap by Friday. Greece expects to submit a final bond swap offer to investors in October, with a view to complete the exercise by the end of the same month.

EU leaders agreed on July 21st to extend a second, €109 billion bailout to Greece, on top of a €110 billion rescue package agreed in May 2010.

Under the plan, private bondholders are supposed to take an average 21 per cent loss on their bond portfolios, in net present value terms, as part of attempts to share the burden of the bailout deal.

The proposal aims to ease Greece's debt burden by swapping bonds with a maturity of up to 10 years for 30 or 15-year bonds with additional guarantees, to make them less risky to hold than original bonds.

Greek and European lenders such as National Bank of Greece, France's BNP Paribas , Belgian group Dexia and Germany's Commerzbank are among the biggest holders of Greek bonds.

But concerns over the broader rescue package and Greece's ultimate fate have been worsened by protracted wrangling over the country's repeated fiscal slippages, lack of reform drive and a bilateral deal with Finland to collateralise the latter's bailout contributions.

The IIF had said on August 25th that between 60 per cent and 70 per cent of private investors have expressed an intention to participate.

Reuters