February 21, 2012
Large holders of Greek government bonds promised strong participation in next month’s €200bn debt swap, despite an unexpected last-minute toughening of the conditions.
Charles Dallara, who led the negotiations with Athens and eurozone officials on behalf of the bondholders, described the agreement as “a solid deal” even though the haircut investors will have to take was increased from 50 to 53.5 per cent in the early hours of Tuesday morning after more than 12 hours of negotiations.
“The biggest benefit here ... is we’ve been able to avoid a disorderly default,” said Mr Dallara, the managing director of the Institute for International Finance.
Heavy participation remains crucial for the deal and the success of Greece’s second international bail-out in two years. The latest official debt sustainability study on Greece assumes 95 per cent of investors will participate in what is being sold as a “voluntary deal”.
In private, large bondholders say the take-up is likely to be high, if only because the alternative of a full-blown Greek default is so bad. But none are willing to guarantee a participation rate, which will depend on Greece’s ability to squeeze investor holdouts through collective action clauses.