(Recasts with bank recapitalisation details)
ATHENS Feb 26 Greece plans to
recapitalize its struggling banks after a bond swap largely
through common shares with restricted voting rights and
convertible bonds, according to a draft law submitted to
parliament over the weekend.
The banks are expected to require recapitalisation because
of impaired loans and losses from a bond swap that Greece
launched on Friday to ease its debt burden .
About 50 billion euros ($67.31 billion) have been set aside
to recapitalise through Greek banks after the bond exchange.
According to the draft law expected to be voted by
parliament on Tuesday, the banks will be recapitalized through
rights issues which will largely be covered by the Greek bailout
fund, the Hellenic Financial Stability Fund.
"The voting rights of the new shares will be limited to
strategic issues ... like mergers and asset sales," said the
Private investors were worried that banks would fall under
state control if they were recapitalised via common voting
shares, but the inclusion of restricted voting rights signals
that the banks would remain privately-run.
Greek Finance Minister Evagelos Venizelos also confirmed
last week that Athens did not plan to nationalize its banks.
The HFSF will give incentives to private investors to cover
at least 10 percent of the rights issue, in which case they
would be entitled to buy shares of the bailout fund at a ratio
based in their participation in the capital increase.
Each bank that seeks funding from the HFSF will have to
present a three-year restructuring plan to the fund and the
Bank of Greece, the draft law said.
The law also said that the Greek government would appoint
managers for the HFSF alongwith the EU. The European Commission
and the European Central Bank will each have one non-voting
representative on its board.
The bailout fund can maintain its stakes in the banks for up
to five years, the law said.
The recapitalisation of the banks will take place after the
bond swap concludes in mid-March.
Earlier, Greece set a March 8 deadline for investors to
participate in the bond swap aimed at cutting its debt burden by
about 100 billion euros, according to a document outlining the
The debt-laden country formally launched the bond swap offer
to private holders of its bonds on Friday, setting in motion the
largest-ever sovereign debt restructuring in the hope of getting
its finances back on track.
In the document, Greece said the March 8 deadline could be
extended if needed. Athens in the past has said it wants to
conclude the transaction by March 12.
The swap is part of a second, 130 billion euro ($175.02
billion) rescue package to claw Greece back from the brink of a
default that had threatened to send shockwaves through the
financial system and punish other weak euro zone members.
($1 = 0.7428 euros)
(Reporting by Lefteris Papadimas, Editing by Deepa Babington;
Editing by Diane Craft)