Proposed Greek bond swap finally gets creditors approval

Finally, the Greek debt restructuring program cleared its last hurdle on Friday after private bond holders agreed to exchange their existing old bonds for new securities. This clears the way for Greece to receive €130 billion in bail-out package from the International Monetary Fund (IMF) and European Union (EU).

The proposed new deal has found favor with 85% of the private holders of Greek bonds whose net worth is € 172 billion in bond amount. The rest 15 percent (equivalent to €25 billion) would be swept up through collective-action clauses. Together, these would add up to € 197 billion out of the total € 206 billion. The latest bond-swap deal expects its private bond holders to accept financial loss that could go as high as 75 percent.

The Greek debt restructuring program is supposed to bring some measure of relief for the participating investors. It is reported that about 15 percent of their holdings would be in good, short-term bonds and 31.5% in upcoming Greek bonds with 11 to 30 years of maturity period. In addition, they would also receive Greece GDP-growth linked security. This doesn’t look much encouraging considering Greece’s current financial woes.

For Greece, besides bringing down the public debt amount, the new bond swap would also reduce its yearly interest burden, starting this year. Last year, the interest itself was as high as €16.4 billion.