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Greece Announces Successful Completion Of Debt Swap Deal

Greece Announces Successful Completion Of Debt Swap Deal
3/9/2012 2:58 AM ET

Greece successfully completed the debt swap agreement with 85.8 percent of its private bond holders voluntarily signing up to take part in the deal, clearing the way for the troubled euro member to secure international funds to avert a disorderly default.

In a statement on Friday, the Finance Ministry said of the EUR 177 billion of bonds issued, which are governed by Greek law, the Republic has received tenders for exchange and consents for holders of approximately EUR 152 billion face amount of bonds. Holders of EUR 172 billion worth of bonds in total have consented to bond offer.

The Ministry also said that EUR 20 billion or 69 percent of foreign-law bonds were also tendered. Greece has extended the tender on foreign-law bonds to March 23. The government has made it clear that it will not extend the invitation period for its bonds governed by Greek law.

Though the participation rate exceeded the 75 percent threshold set by the government to get in with the deal and receive the EUR 130 billion worth bailout money from the international creditors, the level was below the 90 percent, needed to avoid triggering the "collective action clauses" or CACs.

The CACs will force reluctant bondholders to join in and the government said the participation rate will rise to 95.7 percent after activating the CACs.

The International Swaps and Derivatives Association, or ISDA said today that a question relating to a "potential credit event" with respect to the Greece has been submitted to, and subsequently accepted for consideration by the EMEA Determinations Committee.

The ISDA EMEA Determinations committee will meet today at 1 pm GMT to assess if a "credit event" has occurred, which would trigger a payout on credit default swaps. ISDA has said earlier this month that Greece's debt swap deal so far does not constitute a "credit event" or default. The successful completion of the debt swap deal was the pre-condition set by the European Union and the International Monetary fund for handing over the bailout approved last month. The money is vital for Greece to avoid a default on its debt on March 20, when it has to repay EUR 14.5 billion.

Under the debt swap deal, private holders will take a 53.5 percent nominal loss on their total EUR 206 billion Greek debt by exchanging their existing bonds with new ones, having longer maturities and lower face value.

The euro member aims to reduce its total indebtedness to 120.5 percent of GDP by 2020 from the current level of 160 percent.

The Institute of International Finance, or IIF, welcomed the results of the swap offer. IIF negotiated the deal with the Greek government on behalf of the private creditors.

Greece will continue implementing the measures needed to achieve the fiscal adjustments and structural reforms to which it has committed and that will return Greece to a path of sustainable growth, Finance Minister Evangelos Venizelos said.

by RTT Staff Writer

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