Major Greek banks agree on bond deal
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Greece's six largest banks have agreed to participate in a crucial bond-swap deal, the government said Tuesday, in a boost for the struggling country as a deadline for the landmark agreement looms.
The Finance Ministry said the six banks have already agreed to participate or would recommend participation at board meetings on Wednesday and Thursday. Though Greece still needs many more creditors to sign up by the Thursday deadline, the inclusion of some of the big banks is a relief for officials and potentially persuasive for smaller bondholders.
The bondholders will lose 53.5 percent of the face value of their debt — and around 75 percent in real terms — in exchange for new bonds with longer repayment deadlines and lower interest rates.
The bonds deal is vital to avoid default later this month and aims at cutting more than euro106 billion ($139 billion) off the country's national debt.
The deal depends on near full participation by creditors, but if a large number agree to take part it can force any holdouts, and more interest is likely to come at the last minute. A dozen international banks had already signaled they would participate.
The ministry statement did not name the Greek banks involved in the talks, but a government official later confirmed that they were National Bank, Eurobank, Alpha Bank, Piraeus Bank, ATE Bank and Postbank.
Greek banks hold about euro45 billion ($59.2 billion) of Greece's total euro206 billion ($271 billion) privately-held debt, with the six largest banks holding 97 percent of that amount, according to IMF estimates.
Continued uncertainty over the Greek deal hit global markets Tuesday, but shares on the Athens Stock Exchange rallied 2.77 percent to 755.06, with banking stocks up 8.5 percent on improved local expectations of an agreement.
The bond deal is an integral part of the country's second package of international bailout loans, from eurozone countries and the IMF, worth euro130 billion ($171 billion).
Greece was trying to step up the pressure on other private creditors to sign up .
The country's Public Debt Management Agency issued a warning to potential holdouts on the agreement, known as the Private Sector Involvement, which depends on high participation to have any success.
"Greece's economic program does not contemplate the availability of funds to make payments to private sector creditors that decline to participate in PSI," the agency said.
A group representing private holders of Greek government bonds had already said on Monday that a dozen banks, insurers and investment funds — including German insurer Allianz, French bank BNP Paribas, Germany's Commerzbank and Deutsche Bank — will participate in the swap.
"There remains a long way to go given that these particular (overseas) banks account for only 20 percent of the available bonds covered in the PSI agreement," said Michael Hewson, markets analyst at CMC Markets, before the Greek banks signed on.
Greece has passed legislation known as collective action clauses, or CACs, which could allow it to force holdouts to participate if a majority of bondholders agree to sign up voluntarily.
Bondholders who do sign up will get sweeteners such as a payment up front and added interest linked to the growth of Greece's economy. If the PSI goes ahead, the actual swap is set for March 12, and the settlement date for those who hold Greek bonds issued under foreign law has been set for April 11.