Greece yet to outline debt swap plan

Greece has yet to send out a detailed plan to exchange its debt for bonds it could fund more cheaply, bankers said today, suggesting Athens is finding it harder than expected to meet a crucial condition for its second international bail-out.

The country had first been optimistic that talks about the scheme - designed by politicians to share some of the pain of the costly bail-out with banks and insurers and placate tax-payers - would close by mid-August.
But Greek officials have said they now expect a deal in September, and bankers said the delay was due to the fact that details of the proposed deal remained unclear and hoped for more clarity from the Greek government within days.

"The talks are still ongoing, the offer is not finalised," said one Greek banker, speaking on the condition of anonymity. Others also said they had yet to receive a Memorandum of Understanding with final terms and conditions.

As a result, few banks have committed to the plan.

"Participation is at around 50 per cent now," a source close to the talks told Reuters. "Take-up could jump sharply in the next few days if remaining details are clarified."

Greece needs a high take-up rate of 90 per cent to reach its aim of swapping or rolling over €135 billion of bonds. It has already said it wants to extend the swap by four years to include bonds maturing by 2024.

The talks are lead by the Institute of International Finance (IIF), a bank lobby group which represents more than 400 banks, insurers and other financial services firms.

It was too early to gauge the level of commitment, because banks did not have enough information to figure out how exactly the debt restructuring would cost them, another senior banker outside Greece said.

"It would be wrong to say this private sector participation is now a non-starter," the banker said.

Still, some in markets fretted about the delay.

"Any delay creates concern about meeting the 90 percent target and uncertainty about the second bailout," said Takis Zamanis, chief trader at Beta Securities.

"The sooner the (deal) is completed, the faster conditions in the banking sector will normalise."

Greece has given its banks until September 9 to decide but bankers say details remain sketchy on issues such as the accounting treatment of the plan's four options and whether it will involve longer maturity bonds.
"There is still a lack of clarity on some issues and it makes some bankers reluctant to participate," said a senior Greek banker on condition of anonymity. "We are expecting the government to spell out some key terms in the next few days."

Bankers said the government may decide to improve terms if it sees participation remains lower than expected after the September 9th expression of interest deadline expires.

"It could, for example, improve the haircut from 21 per cent to 19 per cent," a second Greek banker said. "Or it may decide to reduce the target to below 90 per cent."

Bankers said a row over a bilateral deal with Finland - which was offered Greek cash collateral in exchange for participating in the second bailout and which rattled markets - wasn't the reason for the delay.

Reuters