Bloomberg News

French Banks Said to Offer 70% Greek Government Debt Rollover

June 26, 2011

June 27 (Bloomberg) -- French banks, including BNP Paribas SA, have told the French government they are willing to partly roll over maturing Greek government bonds in a bid to avoid a default by the debt-laden nation, three people familiar with the plan said yesterday.

Under the proposal discussed in recent days between the French Banking Federation and the French Treasury, bondholders would re-invest about 70 percent of Greek sovereign debt maturing from mid-2011 to mid-2014, said one of the people directly involved with the talks.

Fifty percent of the redemptions would go into 30-year Greek securities, with the remaining 20 percent invested in a fund made of “very-high quality” securities that would back the 30-year bonds, that person said. The proposal may be altered, he said. All three people spoke on condition of anonymity because the talks are ongoing and private.

European governments are seeking to persuade the region’s banks to voluntarily participate in Greece’s second bailout to make the country’s debt burden more sustainable. European banks held about $52 billion of Greek sovereign debt at the end of last year, according to Bank for International Settlements data, with French banks owning $15 billion, the second-largest position after German banks, which owned $22 billion.

European Union leaders at a Brussels summit that ended June 24 backed a new aid program to stave off a Greek default so long as Greek Prime Minister George Papandreou shepherds 78 billion euros ($111 billion) of austerity measures through parliament in a vote slated for June 29.

Parallel Talks

Parallel talks between financial companies and finance ministries across Europe on the participation of private-sector bondholders took place last week. French newspaper Le Figaro first reported the French banks’ proposal on its Web site today.

Spokespeople at the French Finance Ministry and the French Banking Federation couldn’t be reached for comment by Bloomberg News today.

French President Nicolas Sarkozy told reporters in Brussels on June 24 that he had “no apprehensions or difficulties” about the discussions with banks, while Prime Minister Jose Luis Rodriguez Zapatero said Spanish banks are “well disposed” to private-sector involvement as their positions are “small.” Talks are also under way in the Netherlands.

German Chancellor Angela Merkel’s government said June 24 banks and insurers will recognize their “very high interest” in sharing the burden of a Greek financial package and an agreement will be reached in the next nine days.

European finance chiefs will decide on July 3 whether Greece has met conditions for its next aid payment.

--Editor: Dick Schumacher.

To contact the reporter on this story: Francois De Beaupuy in Paris at fdebeaupuy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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