Greek Bond Buyback Program Wins Critical Support

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Greece’s five biggest banks have satisfied what finance minister Yannis Stournaras calls their “patriotic duty” by tendering their interest in a critical debt-buyback program. The success of the buyback scheme is essential if Greece is to unlock billions in debt relief from euro zone lenders, including the International Monetary Fund.

Quid Pro Quo

According to Reuters, the country’s five biggest banks each said they had gained approval to participate in the buyback, but have yet to specify how much of their sovereign debt they would tender. Greece’s banks hold about 17 billion euros, or $22 billion, worth of the country’s debt, or 27 percent of the total bonds eligible for the buyback.

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Participation by the banks was both critical and expected: expected because the banks will depend on the bailout funds that will be released on the completion of the buyback, and critical because other major holders of Greek debt, such as pension funds, would not participate.

Athens is trying to reduce its net debt by as much as 20 billion euros, or $25.88 billion, by repurchasing 10 billion euros, or $12.94 billion, of bonds at a percent of the principal amount. That amount ranges from a minimum between 30.2 and 38.1, to a maximum between 32.2 and 40.1, depending on the maturity of the bond…

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