Who’s saying ‘Yes’ to Greek deal?
In view of the fact that the Private Sector Involvement (PSI) exercise is to be concluded this week as the first part of the latest €130 billion 'Greek deal', on 7 March European stock markets seemed less nervous than on the preceding day.
As for the money markets, the single European currency is still losing ground. During the PSI exercise, which expires at 22:00 Greek time (CET +1) on 8 March, the private holders of Greek bonds are expected to accept a swap offering them new debt paper guaranteed under English law by the European Financial Stability Facility (EFSF) of a nominal value equal to 31.5% plus a 15% cash sweetener.
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, the organisation that struck the deal with the Greek authorities.
It is interesting to note that all six major Greek banks announced on 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'.
In addition, six of the country's major pension funds have stated that they will participate, but a number of the smaller institutions have responded negatively. It should be noted that a large part, almost half of the at-least €206bn of bonds involved in the swap, are held by Greek financial institutions or private creditors.
The Greek government expects an overall participation of 75-80%. If this materialises, then Athens will use the Collective Action Clauses to force the rest of the bond holders to participate, and there will be no further offer made for unwilling bond holders.
In a peculiar way, however, certain English-language media are claiming that the participation threshold needs to be as high as 90% for Athens to be able to safely conclude the deal.
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