Harsher terms leave a ‘bitter taste in mouth’ for bondholders

After months of negotiations, the public and private sector finally came together on the 21 February 2012 to announce a comprehensive refinancing package for Greece.

But the private sector element of the deal – involving a voluntary writedown of 53.5% of the €206bn of Greek sovereign bonds held by banks and other financial institutions, and a slashing of future interest rates payable on replacement bonds – was still far from secure.

The terms are tougher than the earlier blueprint drawn up in October 2011, which involved a 50% 'haircut' and a less severe reduction of interest rates. Overall, the restructuring represented a 75% decrease in the 'net present value' of Greek sovereign bond holdings. The question now was whether bondholders would 'volunteer' to take part.

ESO: Background information: The Greek debt crisis of 2010 http://www.europeansources.info/record/the-greek-debt-crisis-key-sources/

ESO: Background information: Eurozone agrees second Greek bail-out http://www.europeansources.info/record/eurozone-agrees-second-greek-bail-out/

ESO: Background information: Eurozone ministers reject private bondholders' Greek offer http://www.europeansources.info/record/eurozone-ministers-reject-private-bondholders-greek-offer/

---