Was Greece’s Debt Buyback a Success?

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Erase DebtWhen the period to buy back Greek debt expired on Friday, the country had only tendered 26.5 billion euros, well beneath the 30 billion euros required by the International Monetary Fund and the euro zone to unlock the next tranche of relief funds. However, after the period was extended to 7 a.m. EDT on Tuesday, Greek banks hit their target.

“Greek banks have contributed almost all of the bonds they had left,” a senior bank executive told Reuters minutes after the 7 a.m. deadline passed. He added that government had received offers for as much as 31.5 billion euros of debt, making the buyback a success. Several other bankers with whom the publication spoke gave a similar assessment.

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The euro zone’s buyback plan called for Greece to repurchase debt worth 30 billion euros with 10 billion euros lent to the country from its foreign lenders. The bonds were priced at a premium to market prices at the time, ranging from a minimum of 30.2 to 38.1 percent to a maximum of 32.2 to 40.1 percent of the principal. Greece’s lenders expect that the sale will cut debt by 20 billion euros.

According to Reuters, several Greek banks exhausted their sovereign debt holdings in the offering. As of Friday, banks had only tendered approximately 60 percent of their 17 billion euros of debt, but after the buyback period was extended, banks offered all or most of their holdings to reach the 30 billion-euro target. However, banks had initially been hesitant to offer their full holdings, as they feared losses over the long term.

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