Greece Closes Bond Swap Offer

The world breathed a collective sigh of relief this afternoon when Greece closed a bond swap offer to private creditors after clearing the minimum threshold of acceptance to push the deal through. The move puts Greece one step closer to its second bailout from the European Union and International Monetary Fund, which it needs to avoid a dangerous default on its sovereign debt.

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More than 75 percent of eligible bonds had already been committed to the swap before the final deadline for declaring interest passed on Thursday at 8:00 p.m. GMT, which means the biggest sovereign debt restructuring in history will go forward, with bondholders accepting losses of roughly 74 percent on the value of their investments in a deal that will cut more than 100 billion euros from Greece’s public debt.

Preliminary results from the offer are expected early Friday morning, at 6:00 a.m. GMT, before a conference call with euro-zone finance ministers in the afternoon, on which they may decide whether to clear the overall bailout package, though they may leave the final decision until a face-to-face meeting on Monday. Greece must have the funds from its next bailout by March 20 when some 14.5 billion euros of bonds come due.

It is as yet unclear whether final take-ups for the offer will hit the 90 percent mark for which Greece had been aiming. Athens earlier said it would abandon the deal if it did not receive at least 75 percent participation, and that it required two-thirds take-up to deploy a legal device to force holdouts to accept the terms.

Now with over 75 percent take-up already secured, Athens will be able to apply collective action clauses imposing the deal on all holders of 177 billion euros in bonds regulated by Greek law, though some 18 billion euros in bonds regulated under international law pose a more complex problem, with a number of the hedge funds in possession of said bonds expected to try to fight a deal in court.

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