By Marcus Bensasson and Tom Stoukas - Jan 21, 2012 2:07 AM GMT+0700
Jan. 20 (Bloomberg) -- Nouriel Roubini, the New York University professor who predicted the 2008 financial crisis, and Ian Bremmer, president of Eurasia Group, talk about the outlook for the global economy and China-U.S. relations. Roubini and Bremmer, speaking with Bloomberg's Margaret Brennan, also discuss the oil market and the European sovereign-debt crisis. (Source: Bloomberg)
Jan. 20 (Bloomberg) -- Peter Dixon, global equities economist at Commerzbank AG, talks about the possibility of a Greek debt default and his investment strategy. He speaks with Mark Barton on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Greek students stage demonstrations in central Athens. Photographer: Marios Lolos/Xinhua/ZUMAPRESS.com
Greece and its private creditors are closing in on a debt swap accord that’s crucial to cutting the country’s borrowings and allowing it to receive a second round of international aid.
“There’s been significant progress,” Hans Humes, president of Greylock Capital Management and a member of the creditor committee negotiating the deal with the government, said in a Bloomberg Television interview today. “There’s broad agreement about the coupons and structural elements.”
European officials and the nation’s private bondholders agreed in October to implement a 50 percent cut in the face value of just more than 200 billion euros ($259 billion) of Greek debt by voluntarily exchanging outstanding bonds for new securities, with a goal of reducing Greece’s borrowings to 120 percent of gross domestic product by 2020. An accord with bondholders is key to a second financing package for the cash- strapped country, which faces a 14.5 billion-euro bond payment on March 20.
Talks on the swap were set to resume at 7:30 p.m. in Athens, Greek Finance Minister Evangelos Venizelos told reporters after meeting with creditors and Prime Minister Lucas Papademos today.
Charles Dallara, managing director of the Institute of International Finance, a Washington-based lobby group representing creditors in the talks, said he may have something to say on the matter later today. He declined to elaborate. The talks broke in Athens earlier today so Greek officials could consult with European Union representatives, Venizelos said.
90 Percent Participation
The parties are nearing an agreement under which old bonds would be swapped for new securities with coupons averaging between 4 percent and 4.5 percent, said a person with knowledge of the discussions. Unresolved issues remain, such as whether private investors would be treated differently from official creditors in the event of a later default, said the person, who declined to be identified because the talks are confidential. The objective is to reach a deal before Jan. 23, the person said.
The two sides, which broke off negotiations on Jan. 13 before resuming them two days ago, have struggled to reach an accord on the coupon and maturity of the new bonds, which would determine losses for investors.
Humes said he’s “cautiously optimistic” the talks will lead to an accord. “If the IIF shake hands with the other side of the table, we will have a 90 percent or higher acceptance rate,” Humes estimated.
Voluntary Swap
Marathon Asset Management LP CEO Bruce Richards estimated in a Jan. 17 interview that private creditors were likely to get cash and securities with a market value of about 32 cents per euro of government bonds in the debt accord.
Marathon, which has $10 billion under management, is on the committee of 32 private creditors formed in November to negotiate with Greece, the International Monetary Fund and the EU. It’s not on the smaller steering committee directly involved in negotiations.
Questions remain how the two sides can craft a voluntary deal that will provide the debt relief the Greek government requires while attracting enough participation from bondholders. The government may scrap its earlier threat to pass a law compelling full participation from private creditors, said the person familiar with the talks.
Venizelos said before yesterday’s round of talks that for the final deal to lead to a sustainable level of debt for the country there must be a 100 percent participation rate.
Troika Talks
“Critical negotiations are taking place with representatives of the private sector on how they will participate as radically and bravely as possible, but also voluntarily,” Venizelos told lawmakers in Athens, in comments televised live. “It must be voluntary and participation must be 100 percent,” he said.
Hedge funds holding Greek bonds may resist the deal, seeking greater profit by getting paid in full, either by the Greek government or by triggering payouts from credit-default swaps. Winning support from banks seeking to limit their losses may be easier than including hedge funds and other speculators who bought securities at distressed levels.
Vega Asset Management LLC resigned from the committee of Greek creditors negotiating the debt swap last month because the Madrid-based hedge fund refused to accept a net present value loss exceeding 50 percent, according to a Dec. 7 e-mail sent to other panel members, which was obtained by Bloomberg News.
Greek officials also met today with the so-called troika mission, which is comprised of European Commission, European Central Bank and IMF representatives, on the new 130 billion- euro financing accord for the country.
‘Interdependent’
“Reaching an agreement on the new loans and finishing a debt swap are interdependent,” Venizelos told lawmakers in Athens yesterday.
The creditors’ steering committee negotiating the debt swap includes representatives from banks and insurers with the largest holdings of Greek government bonds, including National Bank of Greece SA (ETE), BNP Paribas (BNP) SA, Commerzbank AG (CBK), Deutsche Bank AG (DBK), Intesa Sanpaolo SpA (ISP), ING Groep NV (INGA), Allianz SE (ALV) and Axa SA. (CS)
Financial firms on the IIF’s private-creditor investor committee, a larger group of 32 members that includes the smaller steering committee, hold more than 47 billion euros in Greek sovereign debt, according to data compiled by Bloomberg from company reports.
To contact the reporters on this story: Marcus Bensasson in Athens at mbensasson@bloomberg.net Tom Stoukas in Athens at astoukas@bloomberg.net
To contact the editors responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net; Jerrold Colten at jcolten@bloomberg.net Craig Stirling at cstirling1@bloomberg.net
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