(Corrects 9th par to say buyback could knock around 20 bln
euros off Greek debt)
* IIF says debt buyback would bring only marginal benefit
* Global finance group says restructuring threatens
* Remarks made as euro zone mulls steps to cut Greek debt
By John O'Donnell
BRUSSELS, Nov 20 A tentative plan to further
restructure Greek bonds owned by private investors risks
undermining the euro zone's credibility, a senior bank industry
representative said on Tuesday.
The Institute of International Finance (IIF), which helped
coordinate a large writedown of Greek bonds owned by banks and
pension funds earlier this year, said any further effort to have
the private sector carry the can would be taken badly and could
wreck Athens' chances of raising money from the markets in the
The comments from the IIF's deputy managing director came as
euro zone finance ministers were meeting to consider a proposal
for Greece to buy back a portion of its private-sector debt at a
deep discount, thereby lightening its overall debt burden.
"Debt restructuring was clearly explained to investors as a
one off, as unique, not to be repeated," Hung Tran told Reuters.
"If they do restructure again, their own credibility is at
risk," said Tran, who was closely involved in a "haircut"
carried out in March which handed losses of around 75 percent to
private bondholders and reduced Greek debt by 100 billion euros.
The proposal being discussed by ministers on Tuesday is
somewhat different, but would still constitute an overhaul of
The plan as explained to Reuters would involve Greece
offering private-sector bondholders around 30 cents for every
euro of Greek debt they own, allowing Athens to pay down some of
its vast outstanding obligations.
Depending on their maturity, Greek bonds are currently
trading at between 20 and 30 cents on the euro.
The private sector still holds about 60 billion euros of
Greece's total 340 billion euros of sovereign debt, and
officials told Reuters the buy-back could cover 30-40 billion of
the 60 billion. Depending on the price, such an operation could
knock 20 billion euros of more off Athens' debt mountain.
Tran, whose organisation represents around 400 of the
world's largest banks and insurers, was critical of the idea.
"An attitude of the official sector that views the private
sector as a source of funding after the earlier unprecedented
debt forgiveness would be badly received," he said, adding that
it could undermine Greece's chances of borrowing in the future.
Tran warned that any attempt to coerce investors into taking
such a discount, by using collective action clauses that force a
minority of dissenters to accept, would exacerbate the problem.
There is no indication at this stage that the plan, if put
into effect, would involve CACs.
"That would be an abusive use of CACs. It would be a very
bad faith action on the part of the authorities," said Tran,
adding that it would prompt investors to fear similar moves by
other struggling euro zone countries.
Greek debt is forecast to reach almost 190 percent of
economic output next year. The International Monetary Fund says
it needs to be cut to 120 percent of GDP by 2020 if the debt
level is to be sustainable in the long run.
(Reporting By John O'Donnell, editing by Luke Baker/Mike