Greece and its private creditors said they had made progress during talks in Athens on a debt- swap accord needed to lower the country's borrowings and clear the way for a second round of international aid.
"The elements of an unprecedented voluntary private-sector involvement are coming into place," according to an emailed statement from Charles Dallara, managing director of the Institute of International Finance, a Washington-based lobby group representing creditors negotiating with the government.
European officials and the nation's private bondholders agreed in October to implement a 50 per cent cut in the face value of just more than €200 billion of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece's borrowings to 120 per cent of gross domestic product by 2020.
Athens had been anxious to strike a deal before a meeting tomorrow of euro zone finance ministers, just in time to set in motion the paperwork and approvals necessary to receive a new injection of aid to avoid a messy bankruptcy in March.
An accord with bondholders is key to a second financing package for the cash-strapped country, which faces a €14.5 billion bond payment on March 20th.
Private bondholders will likely take a hit of 65 to 70 per cent on their holdings, with Greece's new bonds featuring 30-year maturity and a progressive coupon, or interest rate, averaging out at 4 per cent, another banking official close to the talks said.
"Now is the time to act decisively and seize the opportunity to finalise this historic deal and contribute to the economic stability of Greece, the euro area and the world economy," Mr Dallara said in a joint statement with Jean Lemierre, a special adviser to the chairman of BNP Paribas.
A four-hour meeting with the IIF officials and prime minister Lucas Papademos broke up about 1am on Friday night in Athens. The two sides were in contact by telephone yesterday, said a Greek finance ministry official.
An IIF steering committee team of experts was in Athens and working with the government toward an agreement, he said. "There's been significant progress," Hans Humes, president of Greylock Capital Management and a member of the creditor committee, said in a Bloomberg Television interview.
"There's broad agreement about the coupons and structural elements."