Bloomberg News

Piraeus Says Increase in Greek Bond Losses Won’t Help Nation

October 14, 2011

(Updates with more Sallas comment from sixth paragraph.)

Oct. 14 (Bloomberg) -- Piraeus Bank SA Chairman Michalis Sallas said increasing bondholders’ losses to 50 percent under a voluntary swap of Greek debt would result in few savings and force the government to resort to more international borrowing.

“The benefit would be about 20 billion euros ($28 billion) to 25 billion euros and not 180 billion euros, which, either from ignorance or partial information, many believe,” Sallas, the head of the country’s fourth-biggest bank, said in an e- mailed statement today.

Sallas said Greek banks, pension funds and insurance companies made up more than half the investors that had pledged in July to take part in the swap, which proposed a 21 percent writedown, and that had the most to lose from imposing stiffer losses.

“Greece will be forced again to resort to European countries and the IMF for loans to boost its social security funds and recapitalize its banks,” Sallas said.

Piraeus Bank said Aug. 31 it wrote down the book value of 6.8 billion euros of bonds eligible for inclusion in the debt swap that will help fund Greece until 2013. Piraeus, based in Athens, also made provisions for 371 million euros of bad loans as the economy shrank after wage and pension cuts implemented in exchange for the first 110 billion-euro bailout in May 2010.

Sallas said the proposals for writedowns don’t relate to official loans or bonds held by the European Central Bank and also excludes as much as 45 billion euros in Greek bonds that expire after 2020.

More Greek banks will need to use the Hellenic Financial Stability Fund if the loss on their Greek government bond holdings is more than 35 percent, Athens-based newspaper Kathimerini reported today, citing unnamed fund officials.

A cut in the value of the banks’ government bond holdings of 50 percent would result in almost all Greek lenders resorting to the fund, following the example of Proton Bank, which was restructured on Oct. 10 with the Financial Stability Fund as the sole shareholder, the newspaper said.

--With assistance from Maria Petrakis and Marcus Bensasson in Athens. Editors: Steve Bailey, Keith Campbell

To contact the reporter on this story: Paul Tugwell in Athens at ptugwell1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net


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