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Greece Hairline Escape from Bankruptcy – The Swap Deal


Greece makes a hairline escape from an economic collapse through the biggest (next to Argentina 2005 $81.8 billion) sovereign restructuring in history after getting private investors to forgive more than €100 billion ($132 billion) of debt.


Highlights of Swap:

  • Ministers freed up 35.5 billion euros in payments and interest for bondholders.
  • Investors with 95.7 percent of Greece’s privately held bonds will participate in the swap after so-called Collective Action Clauses (CAC) are triggered.
  • Bondholders tendered €152 billion of Greek-law bonds, or 85.8 percent, and €20 billion of foreign-law debt.
  • Greece extended its offer to holders of non-Greek law bonds to March 23, after which sweeteners will no longer be available.
  • The goal of the Swap is to reduce the €206 billion of privately-held Greek debt by 53.5 percent.


Economic conditions:

  • Greek GDP was 7.5% lower in the fourth quarter than a year earlier.
  • The economy is mired in a fifth year of recession.
  • Greece would face a debt burden of 120.5% of GDP by 2020 under current targets.


The Swap Deal:


The Swap would give the investors new bonds with a face value of 31.5% of the old ones together with notes from the European Financial Stability Facility. The new debt is governed by English Law and comes with warrants that will provide extra income in years when Greek economic growth exceeds thresholds. The loss in present value terms for investors is more than 70 percent.


Posted   on  11 Mar 2012

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