10 billion euros for the repurchase of bonds

Shortly before 10 am today, the PDMA (PUBLIC DEBT MANAGEMENT AGENCY) announced the public offer of the Greek government, which sets the amount of 10 billion euros offered by the ministry of Finance to repurchase Greek bonds issued in the past, which will be in the hands of banks and funds around the world.

This proposal-process will remain open until Friday, December 7 at 17:00 London (local time), 19:00 GMT. The price offered by the Greek government is ultimately higher than the closing one of November 23. On this issue and on the whole project there will an update on the 12th from the Eurogroup in Brussels.

The proposal for the repurchase will be carried out on a voluntary basis and without putting pressure on Greek bondholders. However, according to reports, it will ultimately be attended by all the major Greek banks, while insurance funds will not be required to participate.

The Finance ministry estimates that the response to the Greek proposal will be rather high with chances of offers to repurchase bonds rising to over 30 billion euros, half of which relates to bonds held by Greek banks (about 15 billion) and as much or more coming from foreign banks and funds (30 in total) holding Greek bonds, which will rush to exploit the liquidity offered by the Greek state to close their positions on Greek bonds and guarantee instant profits that will help them record high annual yields at the end of December.

The economic team is counting heavily on the increased cost and the intense competition between the major players that hold positions of more than 1 billion euros each in Greek bonds.

It is also estimated that the Greek side will have the luxury of being able to choose what bonds it will accept for exchange, based on the offered funds, possibly giving priority to the Greek players and to bonds maturing in 2023.

How the exchange process will be carried out

The process to attract interest which begins today will remain open for about 5-7 days. The government will spend approximately 10 billion euros to repurchase bonds with a nominal value of nearly 30 billion euros and erase a debt of about 20 billion. 10 billion will come from a new EFSF loan which can be repaid by proceeds from privatizations which, as Stournaras said, will exceed the 43.7 billion euros of the tranche.

The Finance minister, however, has admitted that there is a plan B for the impairment of Greece’s state debt, in case the repurchase of bonds proves fruitless. The Eurogroup of December 13 and the IMF will examine the PDMA report on the results of the repurchase of bonds and will act accordingly, as this operation is part of the agreement for the next tranche and a prerequisite for IMF participation.