Creditors to participate in Greek deal
The Greek government is predicting a participation of at least 75% in the Private Sector Involvement (PSI) scheme to alleviate the Greek debt. To this effect holders of a total value of €206 billion of Greek bonds are being requested to participate in this exercise, which comprises a 'haircut' of 53.5% of the nominal value of their titles. The PSI participation deadline is at 22:00 on 8 March.
According to Bloomberg, 58% of private holders of Greek debt have expressed their willingness to participate.
On 7 March, Greek Finance Minister Evagelos Venizelos said that there will be no better offer made. If the willing participation of bondholders reaches a qualified majority in every debt title out of the 80 in circulation , the Greek government will activate the Collective Action Closes (CACs), forcing the remaining credit-holders to participate, without running the risk of sparking a ‘credit event’.
In accordance a general assembly is currently being held in Athens for every one of those 80 bonds, with holders voting ‘Yes’ or ‘No’ to the swap. At the end of the day, as in every corporate general assembly, the qualified majority will impose its will on the minority.
However, most of the prudent holders of Greek bonds have already written off almost two-thirds of the nominal value of the bonds they hold, following the mark to market principle of asset evaluation. Greek bonds were sold and bought in the secondary market at discounts reaching 65%. As a result, the actual value of those assets is around one-third of their nominal value.
In any case all major European banks with a portfolio of Greek debt paper are expected to participate in the deal – a number of them have already announced their intention to do so as members of the International Institute of Finance (IIF), the organisation that struck the PSI deal with the Greek authorities and the EU.
To this effect IIF issued an announcement confirming that the following members of its Co-ordination Committee have already announced they are going to participate: Allianz, Alpha Bank, Axa, BNP Paris Bas, CNP Assurances, Commerzbank, Deutsche Bank, Eurobank EFG, Greylock Capital, ING Bank, Intesa San Paolo and National Bank of Greece. The same is true for the largest Italian insurance firm, Assicurazioni Generali. Sources indicate that IIF members hold a nominal value of Greek debt paper of €80bn between them.
In addition, almost all the German banks that hold Greek debt are reportedly ready to participate. FMS Wertmanagement, the German bank with the largest exposure to the Greek problem, holds bonds of €8bn and is reportedly saying 'yes'.
It is interesting to note that all six major Greek banks announced on Tuesday 6 March that they accept the terms of the deal, not only for the bonds they hold (around €40-50bn) but also for the loans they have granted under the guarantee of the Greek government, with the additional nominal value of €7bn for the 'haircut'.
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