Published December 07, 2012
ATHENS – Greece's three biggest banks won board approval to take part in the country's debt buyback which expires on Friday, putting Athens on track to meet targets set by international lenders.
The buyback scheme, in which investors must declare their interest by Friday, is central to efforts by Greece's euro zone and International Monetary Fund lenders to cut its debt to manageable levels and unlock aid for the stricken country.
As expected, the country's four biggest lenders - National Bank, Alpha, Eurobank and Piraeus bank - each said they had approval to participate, but did not specify how much of their sovereign debt holding they would tender.
Under the scheme, Athens aims to spend 10 billion euros of borrowed money to buy back bonds far below their nominal value, in a bid to cut debt by a net 20 billion euros.
Banking sources earlier said the banks had asked their boards to approve selling back as much as their entire holdings. Smaller Attica bank's board also approved participation.
"The proposals by banks to their boards were positive on the buyback offer, asking for approval to participate by up to 100 percent," said one banker, who declined to be named.
The buyback is the latest in three years of euro zone efforts to resolve Greece's problems. The economy has shrunk by 20 percent in the last five years and unemployment has hit a record 26.2 percent, pushing public anger to new highs.
Athens has pressured its banks, which hold an estimated 17 billion euros ($22 billion) out of the 63 billion in eligible bonds, to sell and they had been expected to do so since they depend on bailout funds that a successful buyback would unlock.
Analysts said the better-than-expected terms announced by Athens earlier this week would draw enough foreign investors as well, ensuring success.
"Athens put forth a reasonable if not generous offer for hedge funds to participate," said Sassan Ghahramani, CEO at New York-based Macro Advisers, a hedge fund consultancy.
"I expect there will be strong participation from hedge funds, tendering a substantial portion of their Greek bond holdings," he said.
Finance ministry officials denied the government planned to extend the deadline for bids beyond Friday, dismissing a Greek newspaper report suggesting the deadline could be extended to early next week. The deadline expires at 1700 GMT.
The buyback is part of a broader debt relief package worth 40 billion euros ($52 billion) agreed by Greece's euro zone and International Monetary Fund lenders last month.
Finance Minister Yannis Stournaras, who has told banks it was their "patriotic duty" to ensure the scheme is a success, told local radio Athens would include a provision that protects bank boards from lawsuits from shareholders in case of losses.
"There will be the same provision that was included in the PSI (earlier debt restructuring)," he told Real news radio, referring to the March debt swap where Athens passed a law shielding bank boards from investor lawsuits.
Greek banks - already battered by the country's debt crisis - have been hit further by fears that they would be forced to book losses from the buyback.
The price range set for the buyback by Athens varied from a minimum of 30.2 to 38.1 percent and a maximum of 32.2 to 40.1 percent of the principal amount, depending on the maturities of the 20 series of outstanding bonds.
The buyback is being conducted through a Dutch auction, which allows Athens to assess the level of demand before setting the price. The settlement date is expected to be Dec. 17.
Prime Minister Antonis Samaras has already said Greek pension funds holding more than 8 billion euros of the bonds would not take part, increasing the pressure on the remaining domestic bondholders to do so.
Two in three Greeks have a negative opinion of the pro-bailout government, a survey by Metron Analysis published in the Efimerida Syntakton newspaper showed on Friday.
If elections were held now, the main opposition party SYRIZA would win with 22 percent of the vote over the co-ruling New Democracy party, which would only muster 19.8 percent of the vote, the poll showed.