Published December 07, 2012
ATHENS – Greece's five biggest banks said they would 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 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 debt-stricken country.
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.
The country's biggest lenders - National Bank, Alpha, Eurobank, Piraeus bank, and Hellenic Postbank - each said they had approval to participate, but did not specify how much of their sovereign debt holding they would tender.
Smaller Attica Bank also said it would take part. Investors had to declare their interest by 1700 GMT on Friday. A Greek official said Athens would not make any announcement until Monday on the interest it had received.
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.
"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' hopes of drawing enough foreign investors to the scheme grew after it announced better-than-expected terms this week, with price ranges at a premium over last week's prices.
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.
"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.
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.
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.
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.
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.
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.
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.