Greece closing in on debt swap

A total of 30 banks holding 81 billion euros ($106 billion) in Greek sovereign debt agreed to participate in a bond swap by Wednesday afternoon, the Institute of International Finance (IIF) said.

The IIF said these firms owned 39.3 percent of the 206 billion euros of privately-held Greek debt. The pledges bring Athens closer to the 66.7 percent participation rate it needs to force the deal onto reluctant bondholders.

Among the 30 investors named by the IIF are Generali – France's second-largest bank – Italy's Unicredit and Munich Re – the world's biggest reinsurer – as well as a number of Greek banks and pension funds.

However, five Greek pension funds – holding an estimated 2 billion euros worth of debt – are reported to have refused to participate in the deal.

Greece's Finance Minister Evangelos Venizelos described their participation as "crucial", warning them they would "lose out" if the bond swap fell apart.

"It is damaging to the national interest, and to the interests of the funds as well as to their pensioners and workers," Venizelos told the Real FM private radio station.

Under the IIF-brokered deal, private creditors will have to write off about half of the face value of their Greek debt holdings by exchanging them for Greek bonds with lower interest rates and longer maturities.

Fear of failure

Investors have until 8pm Thursday to sign up to the restructuring deal. If 90 percent of private Greek bondholders agree to swap their holdings, the deal can be successfully implemented.

If more than 66.7 percent participate, Athens said it would force the holdouts into accepting the bond swap by using a Collective Action Clause recently adopted by parliament. Less than that means the bond swap would fall apart, forcing Greece into a disorderly default on its debt.

Meanwhile, several hedge funds, holding about 10 percent of the 200 billion euros being restructured, are expected to reject the bond swap offer.

They hold Greek bonds denominated in Swiss francs and therefore the jurisdiction is outside of Greece.

"I'm aware of several investors actively considering all of their options, including litigation," Steven Friel of the law firm Brown Rudnick told Reuters news agency.

Hedge funds alone are unlikely to derail the swap, but if they were able to reach a better deal in the courts it would anger other creditors and undermine Athens' credibility.

uhe/gb (Reuters, dpa)