Friday, January 20, 2012

More on Greek Debt Deal

by Bill McBride on 1/20/2012 09:01:00 AM

Landon Thomas at the NY Times DealBook has some details: Greece Inches Toward a Deal With Its Bondholders

[A] compromise seems to be at hand, with the Greeks close to locking in an interest rate just below 4 percent on the new bonds, according to officials involved in the negotiations. ... In a concession to creditors, the coupon is expected to escalate beyond 4 percent over time, linked to the growth of the Greek economy.

Assuming all goes according to plan, investors would be offered the opportunity to exchange their old bonds for new ones carrying the agreed-upon terms in early to mid-February.

Bankers say that the creditors believe 50 to 60 percent of private sector bond holders might accept the proposal ... The challenge for Greece and the creditor group is to persuade investors on the fence to join in the deal in order to reach a figure of about 75 percent.

With a 75 percent participation rate, Greece could well be in a position to take advantage of the collective-action clauses that are set to be attached to the Greek law bonds, forcing the terms of the agreement on all bondholders.
And from the AthensNews: Debt swap talks to continue in the evening
The government will continue debt swap negotiations with private sector bondholders at around 7.30pm, Finance Minister Evangelos Venizelos said after concluding a first round of talks with Institute of International Finance (IIF) chief Charles Dallara.
...
Investors have also bridled at the government’s threat to enforce losses if not enough bondholders sign up to the deal.