PSI brings changes for banks

An interest rate starting from 2% for bonds maturing in 2015, 3% for 2020 and 4.3% from then on is provided in the PSI agreement, which the Troika and the IIF reached with Greece yesterday, after a tough negotiation.

A final maturity date is set for 2042, while there is a growth rate of 1% which will be added to the interest payments from 2015 onwards depending on the growth of the economy.

As a return of the larger “haircut”, the Eurogroup gave individuals who will participate in the bonds exchange program (PSI+) higher weighted average interest rates of 3.40%, as agreed in the past, which will now become 3.64%, according to the basic PSI terms released by the Finance Ministry today.

Under these conditions, the transaction is expected to include bonds worth some 206 bn. Euros. The agreement includes the bonds exchange with individuals exchanging their existing bonds with new bonds, which will offer a coupon of 2% until 2014, 3% between 2015 and 2020 and 4.3% thereafter.

Under this new agreement, as to the final acceptance of which Mr. Dallara will respond on Tuesday after presenting it to the IIF members in detail, the damage which is estimated to be incurred by banks at current values is at 69.5%, since the damage from a bigger haircut is covered by the higher interest rate.

Holders of Greek bonds who will participate in the exchange program, will exchange the current bonds in their possession with nominal value bonds equal to 31.5% of τηε nominal value of older bonds as well as EFSF securities lasting 24 months, with a nominal value equal to 15% of τηε bonds exchanged

However, according to sources cited by Reuters, the banks will suffer losses of 74% in net present values of the Greek bonds they hold. Two sources stated that private creditors of Greece will suffer losses of 73%-74% based on the net present value of bonds held, and a third source estimated that the losses will reach 74%.