Greece kicks off debt restructuring plan

Updated: 2012-02-25 04:04


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ATHENS - Greece launched on Friday a public offer for a debt restructuring plan that foresees the write-down of 107 billion euros (144.23 billion US dollars) owned by the private sector as part of efforts to address the country's debt crisis.

The announcement was issued by the Greek Finance Ministry after a cabinet meeting approved the terms of invitations to be made to private sector holders of Greek state bonds.

"The bonds invited to participate in Private Sector Involvement (PSI) plan have an aggregate outstanding face amount of approximately 206 billion euros," read a government statement.

Under the bond swap scheme, private bondholders will voluntarily accept losses of 53.5 percent on the face value of their holdings in exchange of new ones with longer maturities and lower interest rates.

According to the announcement, the private creditors will get in return new Greek state bonds having a face amount equal to 31.5 percent of the face amount of their current bonds.

They will also receive two-year bonds from the European Financial Stability Facility with a face value equal to 15 percent of the face amount of their exchanged bonds, and detachable GDP-linked securities issued by the Greek state having a notional amount equal to the face amount of each holder's new bonds.

Bondholders who remain reluctant to voluntarily accept losses will be bound by the collective action clauses included in the deal.

Greek officials hope that the process could be completed by mid-March, before Athens will have to meet a 14.5 billion euro bond repayment.

The PSI program is closely linked to a 130-billion euro bailout package to Greece, the second to be released to the debt-burdened country in two years, to avoid a devastating bankruptcy.

"A titanic effort is made to conclude all actions needed for the implementation of the PSI plan and the bailout agreement, to secure further vital financial aid to Greece," Greek Prime Minister Lucas Papademos said during the cabinet meeting on Friday.

By the next EU summit scheduled for March 1 in Brussels, Greece should ratify a string of bills including a fresh painful austerity and reform drive pledged to European counterparts and International Monetary Fund lenders in return for the new multi-billion euro rescue loans.

Government sources said Papademos held a telephone conversation on Friday afternoon with German Chancellor Angela Merkel regarding the program ahead of the EU meeting.