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Greece launches bond buyback programme

05 december 2012, 11:36
0
Greek Finance Minister Yannis Stournaras. ©AFP
Greek Finance Minister Yannis Stournaras. ©AFP
Greece's PDMA national debt agency said on Monday it had begun a voluntary buyback of the country's bonds at heavily discounted prices, a condition for receiving its latest instalment of EU-IMF bailout funds, AFP reports.

The PDMA said in a statement that eligible holders had been invited to submit by Friday Greek sovereign bonds to receive payment of between 32.2 and 40.1 percent of the face value.

Those who participate will receive in exchange six-month bills issued by the EU's EFSF rescue fund with up to to 10 billion euros ($13 billion) available for the operation.

Up to 20 series of Greek sovereign bonds with a face value of 62.3 billion euros held by private creditors are eligible for the buyback.

In March, Greece's private creditors had already agreed to write off about 107 billion euros' worth of Greek sovereign bonds and many institutional investors such as banks and insurance companies have completely written off the value of Greek debt in their balance sheets.

The value of Greek bonds has plunged in value as the debt crisis has risen in intensity and since the massive debt writedown by private bondholders at the beginning of the year.

By using newly-borrowed money to buy back its sovereign bonds at a heavy discount, Greece reduces the total burden of debt in what amounts to a refinancing scheme.

The International Monetary Fund and the eurozone agreed last week to release 43.7 billion euros in rescue loans in four instalments from December to March to enable Greece to avoid bankruptcy.

But increasingly concerned that Greece's debt is again increasing to unsustainable levels despite the writedown by private creditors, they required a number of steps be taken, including the voluntary buyback programme.

While the EU has resisted pressure by the IMF that official creditors write down the value of their loans to Greece, the interest rates are being cut.

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