September 8, 2011 / 5:52 PM / 6 years ago

Global bondholders to decide Greek swap offer Friday

ATHENS, Sept 8 (Reuters) - Investors in Greek government debt across the world tell regulators on Friday how they will participate in a bond swap designed to give the troubled nation more time to emerge from a debt crisis, with officials expecting a take-up of about 70 percent.

Athens has given banks and insurers in 57 countries until Sept. 9 to say whether they intend to take its debt exchange offer, a key part of a second 109 billion euro bailout package it clinched in a July 21 summit to avoid bankruptcy.

“September 9 is the cutoff date and it is very likely that we may have a bigger response rate as bond holders rush on the last day,” a source close to the procedure said on condition of anonymity.

Greece had threatened to cancel the deal unless it got 90 percent participation, meaning 135 billion euros ($189 billion) of its outstanding bonds maturing by 2020 swapped or rolled over in a global transaction it wants to conclude next month.

Greek authorities have said they are pleased with the progress of the PSI without disclosing details on take-up rates, which bankers say are around 70 percent -- a level that is no reason to worry that the swap will fail.

“Even with a participation rate of 70 percent or better, which is my current view, the PSI (private sector involvement) will proceed,” said an Athens-based banker close to the procedures.

Bondholders’ non-binding responses will be aggregated by their respective regulators which will then send data to Athens, a process that may take time, meaning no announcement is planned by Greece on Friday, its debt agency chief has said.

A high participation rate will give Athens cash-flow relief and more time to get its fiscal house in order amid rising worries that its commitment and ability to implement economic reforms prescribed by its international lenders is wavering.

Last month Greece turned the screws on investors, saying it may not go ahead with the debt swap if holders of less than 90 percent of the bonds take part in the scheme. But this may be tactics by Athens to get most of bondholders on board, bankers said.

Pressured by their taxpayers, euro zone governments insisted that the private sector shares the burden of averting a financial collapse in Greece before agreeing to the new bailout.

A low participation rate in Greece’s debt swap may mean reluctant euro zone partners will have to cough up more cash for the overall package to work.

But a take-up rate close to target will not require major plumbing to adjust the rescue package, bankers said, adding that the shortfall could be covered by reallocating funds.

    A source close to the procedures said the feeler by Athens on bondholders’ intentions on the swap would show strong take-up in Europe, where the majority of Greek debt was sold for years.

    “There is more support in Europe, where they will likely go for the full amount,” the source told Reuters.

    On Wednesday, another source close to the PSI talks said roadshows were taking place in Asia and America and that it would take more time to conclude the deal.

    Greek and European lenders such as National Bank of Greece (NBGr.AT), France’s BNP Paribas , Belgian group Dexia and Germany’s Commerzbank are among the biggest holders of Greek bonds.

    The International Institute of Finance (IIF), a global banking group leading the swap talks, expressed confidence earlier in the week that the swap offer would get the necessary investor support.

    The trade group said last month that participation was at 60-70 percent. (Reporting by George Georgiopoulos)

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