Greece Nears Deal With Private Creditors to Avoid Disorderly Default

Greece is closing in on a deal with private creditors that would prevent a disorderly default but have investors incurring a loss of up to 70 percent on their Greek debt holdings.

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Sources close to the negotiations, which resumed on Thursday after breaking up last week over a disagreement on the coupon, or interest payment, that Greece would offer on its new bonds, said an agreement could come later in the day, to be followed up by technical talks over the weekend.

Private bondholders would likely incur a real loss of 65 to 70 percent, according to a banking official close to the talks, with the new bonds having a 30-year maturity and offering a progressive coupon, or interest rate, averaging out at 4 percent.

“There could be a pre-agreement tonight, but technical discussions with the lawyers will likely continue over the week-end and next week,” another source close to talks said, adding that the European Central Bank may also be involved in the deal.

Greece is racing to push through an agreement by Monday in order to receive a fresh injection of aid before 14.5 billion euros of bonds mature in March. Greece’s official lenders, the European Union and the International Monetary Fund, are awaiting an agreement before they dole out funds from a 130 billion-euro rescue plan drawn up in October.

The debt swap is aimed at cutting 100 billion euros off a debt load of more than 350 billion euros. The second bailout is expected to reduce Greece’s debt to a more manageable 120 percent of gross domestic product by 2020, from about 160 percent of GDP today.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

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