Counterparties: Greece’s latest bond deal
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Greece is buying back €10 billion of bonds it issued earlier this year, at between 30% and 40% of face value. As Landon Thomas notes, the expected average price of 32-34 cents on the euro represents a “premium of 4 cents above the level where the bonds traded at the end of last week”.
The program is part of the agreement Greece reached on November 27 to decrease its debt burden to 124% of GDP by 2020. That agreement allowed Greece to remain on track to receive more than €40 billion in vitally needed aid.
Sober Look cites a Credit Suisse report highlighting a huge positive of the plan for the Greek public sector:
Following the buyback, more than 80% of Greece’s debt will be held by the official sector and seems to be in the process of being – for all practical purposes – transformed into a “zero-coupon perpetual bond”. The average maturity on the EU/EFSF loans (which will soon represent 65% of Greek debt) is increased to 30 years, while there is a ten-year grace period.
Lee Buchheit, the dean of sovereign-debt restructuring, has referred to this as the “12th of never” strategy. And it works: Greece’s interest expense as a percentage of GDP will be below the Eurozone average — and even below the US.
Simone Foxman writes that the EU is looking to Greek banks, in particular, to tender into the exchange — although some Greek bankers don’t seem to be very happy about the idea. It’s unclear what the contingency plan is if enough bondholders don’t take the plunge, beyond a “complete reassesment”.
The WSJ’s Matthew Dalton and Matina Stevis observe that there isn’t much more the EU can do to help Greece, if this buyback doesn’t work. And if you want to do the math yourself, here’s an interactive bond buyback calculator from the Thomson Reuters data team. — Ben Walsh
On to today’s links:
The impossibility of tablet-native journalism – Felix
“There’s more to publishing on the iPad than just blindly reproducing antiquated print metaphors” – Ben Jackson
The best magazine to be seen reading on the (DC) subway – Ad Week