Bloomberg News

Greece Said Aiming to Give Private Lenders Seniority in Talks

December 13, 2011

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Dec. 13 (Bloomberg) -- Greece made new proposals on the structure of a debt swap agreement with private creditors, while disagreement remains on key issues, according to a person on the lenders’ negotiating committee.

Under one proposal, Greece would give 15 cents in cash and 35 cents in new bonds for every euro of existing debt that will be swapped, said the person, who declined to be identified because the discussions are private.

Greece also agreed in principle to try to give private creditors seniority equal to official lenders such as the International Monetary Fund and the European Union, though it’s not clear whether that would be legally permissible, the person said. Agreement hasn’t been reached on the maturity of the new bonds or their coupon, which are crucial to determining the net present value loss the debt holders will face, the person said.

Greece’s debt is forecast to balloon to almost double the size of its economy next year without an accord with private investors, the European Commission said last month. The swap deal, part of a 130 billion-euro ($170 billion) second bailout agreement for Greece, is supposed to help the nation reduce its debt to 120 percent of gross domestic product by 2020.

The country’s 206 billion euros of privately held debt would be reduced by 50 percent under an agreement announced at an Oct. 26 summit of European leaders in Brussels.

--With assistance from Marcus Bensasson in Athens. Editor: Frank Connelly, Jon Menon

To contact the reporter on this story: Christos Ziotis in Athens at

To contact the editor responsible for this story: John Fraher at

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