Greece, creditors struggle to avoid costly default

Greece, creditors struggle to avoid costly default
01:45 PM Jan 18, 2012
ATHENS - Greece goes head to head with its creditors today in a renewed attempt to break a deadlock in negotiations to slash the country's debt and stave off default.
International private sector creditors represented by the Institute of International Finance (IIF) are set to meet the government in the afternoon. Talks broke down on Friday over the interest rate Greece will offer on new bonds and a plan to enforce investor losses.
 Cash-strapped Athens needs a deal with the private sector within days to avoid going bankrupt when €14.5 billion (S$23.8 billions) of bond redemptions fall due in late March.
The IIF said yesterday its managing director and co-chairman of the private investor creditor steering committee for Greece, Mr Charles Dallara, and Mr Jean Lemierre, special adviser to the chairman, would resume discussions with the Greek government.
"They reiterated their commitment to seeking an agreement on a voluntary debt exchange for Greece and encouraged all parties to work in good faith toward this end with a sense of urgency," the IIF said.
Hedge funds holding Greek bonds that mature in March may have the strongest hand.
The Greek government wants to swap out that maturing debt for new, lower-yielding bonds and a small cash payment. But some hedge funds in London and New York that have snapped up chunks of Greece's next big maturing bond, the March 2012, for around 40 US cents on the euro, are balking.
A team of European Union, International Monetary Fund and European Central Bank officials are already combing through Greece's books as part of efforts to put together a €130-billion rescue package the country needs to stay afloat.
The debt swap deal would see creditors voluntarily giving up at least 50 per cent of their promised returns. Without it, the EU and IMF have warned they will consider that Greek debt is not back on a sustainable track and will not release further aid.
The stumbling block in the negotiations has been the low coupon, or interest payment, offered on the new bonds. It could take investor losses well over the 50 per cent originally envisaged in the voluntary writedown.
Bloomberg quoted a US hedge fund manager as saying that Greece was nearing a deal with private creditors that would give them cash and securities with a market value of about 32 cents per euro of government debt.
Bloomberg said Mr Bruce Richards, chief executive officer of New York-based Marathon Asset Management which is a member of a Greek creditors' committee, told the news agency in an interview that he was "highly confident the deal will get done".
No one was immediately available at Marathon to confirm the comments.

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