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Athens has launched the biggest sovereign bond restructuring in history to cut its debt by €107bn (£91bn) – amid warnings from Germany that even if it were successful, there were “no guarantees” Greece could be rescued.
The Hellenic Ministry of Finance on Friday released the highly anticipated offer document, firing the starting gun on a colossal effort to find Greek bondholders and persuade them to participate in a €206bn debt swap. Athens needs bondholders to agree to the deal within days as part of its effort to unlock the €130bn bail-out funds needed to avert default on March 20.
Wolfgang Schaeuble warned that the bailout, which was agreed late on Monday night, might not work. In a letter to German politicians, the finance minister said: “It may also not be the last time the German Bundestag will have consider financial aid to Greece. However, the chances of success with alternatives appear to me to be significantly lower at the current time.”
Bondholders will be asked to voluntarily take a 53.5pc hit on their bonds by swapping them for new instruments worth 46.5pc of their current value.
On Thursday night the Greek parliament approved new collective action clauses (CACs) for the deal, which will make the acceptance of the tender by the majority of bondholders automatically binding on the others.
Charles Dallara, managing director of the Institute of International Finance (IIF), who represented the private creditors, said he was “quite optimistic” that the deal would be approved. He said there was no decision so far to put the CACs into effect.
Analysts said the deal may trigger the payment of credit default swaps (CDS), the complex financial instruments that investors bought to insure their sovereign bonds, even if the swap is not declared a default by rating agencies. Ahead of the bond swap, Credit Suisse said: “We continue to expect a non-voluntary debt restructuring and for it to trigger CDS.” The analysts added: “A debt restructuring/debt exchange is not an event of default but may be a CDS credit event.”