Investors offer about 30 bn euros in Greek debt buyback

Updated 09 December 2012
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Investors offer about 30 bn euros in Greek debt buyback

ATHENS: Greece is set to purchase back about half of its debt owned by private investors, broadly succeeding in a bond buyback that is key to the country's international bailout, a Greek government official said yesterday.
Greek and foreign bondholders offered the targeted 30 billion euros ($ 38.8 billion) in the deal, which is central to efforts by Greece's euro zone and International Monetary Fund lenders to cut its debt to manageable levels.
"The buyback went well in broad terms. The amount offered by investors was within the range expected, about 30 billion euros," the official told Reuters on condition of anonymity. He did not provide more details.
No formal announcement is expected before Monday, another official told Reuters.
The buyback accounts for about half of a broader, 40-billion euro EU/IMF debt relief package for Athens agreed in November. The package broadly doubles the average maturity of its rescue loans to almost 30 years and cuts its interest rates by one percentage point to a level far below 1 percent.
Under its terms, Athens will spend up to 10 billion euros of borrowed money to buy back bonds with a nominal value of about 30 billion euros. This is nearly half the 63 billion euros of Greek debt held by private investors eligible for the plan.
Since the bonds are to be bought far below their nominal value, the country's net debt burden would fall by about 20 billion euros.
A successful buyback will ensure that the IMF, which contributes about a third of Greece's bailout loans, will stay on board of the rescue. It would also unlock the payment of 34.4 billion euros of aid later this month.
Athens badly needs that money to refloat its ailing economy by replenishing the capital of its cash-strapped banks and settle arrears with government suppliers.
The EU and the IMF have been withholding rescue payments to Greece for six months because it had fallen short of promises to shore up its finances, privatize and make its economy more competitive.
Athens has received 148.6 billion euros in EU/IMF funds since May 2010. It stands to get almost 90 billion euros more by the end of 2014.
But the rescue comes at a heavy price. Austerity measures taken in exchange for aid have plunged the country into economic depression. Unemployment hit a record 26 percent in September, the highest in the euro zone.
The economy is going through its fifth consecutive year of recession and is expected to have shrunk by 24 percent when recovery begins in 2014.
The buyback was expected to go well after Greek banks, which hold about 17 billion euros of bonds, announced shortly before a Friday deadline they would take part. Two Cypriot lenders also said they would offer their bonds.
Foreign investors have offered between 15 and 16 billion euros worth of bonds, Greek newspapers reported on Saturday, citing initial estimates without saying how they got them.
Athens' hopes of drawing enough investors to the scheme grew after it announced better-than-expected terms on Monday, with price ranges at a premium over market prices.
The price range varied from a minimum of 30.2 to 38.1 percent and a maximum of 32.2 to 40.1 percent of the principal amount, depending on the maturities of the 20 series of outstanding bonds.
Hedge funds, which bought the debt at rock-bottom prices when it was feared the country would exit the euro, are estimated to hold a large part of Greek debt and the offer was seen as good enough to make them a nice profit.
"Athens put forth a reasonable if not generous offer for hedge funds to participate," Sassan Ghahramani, CEO at New York-based Macro Advisers, a hedge fund consultancy, said on Friday.
"I expect there will be strong participation from hedge funds, tendering a substantial portion of their Greek bond holdings," he said.
The government also enticed Greek bankers by offering to protect them from possible shareholder lawsuits stemming from the buyback.
Greek bankers had been reluctant to take part, in the fear they would book losses on top of the ones they incurred earlier this year when Athens enforced a debt cut on its bondholders.
But the lenders were nevertheless expected to participate because they depend on the bailout funds that Athens stands to receive if its bailout continues smoothly.


Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO

Updated 5 min 36 sec ago
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Saudi Arabia, Russia and China give EU trade reforms thumbs down at WTO

  • China is suing US and EU at WTO
  • Kingdom warns new rules are concerning

The EU’s new rules against countries dumping cheap goods on its market got a rough ride at a World Trade Organization meeting, where China, Russia and Saudi Arabia led a chorus of disapproval, a trade official said on Thursday.

The EU, which is in a major dispute with China about the fairness of Chinese pricing, introduced rules last December that allow it to take into account “significant distortions” in prices caused by government intervention.

A Chinese trade official told the WTO’s anti-dumping committee that Beijing had deep concerns about the new methodology, saying it would damage the WTO’s anti-dumping system and increase uncertainty for exporters, an official who attended the meeting said.

China argued that the concept of “significant distortion” did not exist under WTO rules, and the EU should base its dumping investigations on domestic prices in countries of origin, such as China.

The EU reformed its rules in the hope they would allow it to keep shielding its markets from cheap Chinese imports while fending off a Chinese legal challenge at the WTO.
China said that when it joined the WTO in 2001, the other member countries agreed that after 15 years they would treat it as a market economy, taking its prices at face value.

But the US and the EU have refused, saying China still subsidises some industries, such as steel and aluminum, which have massive overcapacity and spew vast supplies onto the world market, making it impossible for others to compete.

China is suing both the US and the EU at the WTO to try to force them to change their rules.

Legal experts say the dispute is one of the most important in the 23-year history of the WTO, because it pits the major trading blocs against each other with fundamentally opposing views of how the global trade rules should work.

In the WTO committee meeting, Saudi Arabia said the new rules were very concerning, and it challenged the EU to explain how EU authorities could ensure a fair and objective assessment of “significant distortion.”

Russia said the EU rules violated the WTO rulebook and certain aspects were unclear and created great uncertainty for exporters. Bahrain, Argentina, Kazakhstan and Oman also expressed concerns.

But a US trade official said the discussion showed that appropriate tools were available within the WTO to address distortions affecting international trade.