Bloomberg News

Greek Foreign-Law Bondholders Rebuff Debt Restructuring

March 29, 2012

Meetings of holders of 10 out of 12 bonds  with a par value of about 3 billion euros, issued by Hellenic Railways Organization SA and Athens Urban Transport Organization SA and guaranteed by the government, either rejected the restructuring plans or failed to muster a quorum at March 27 meetings, according to a release from the Greek Public Debt Management Agency. Photographer: Simon Dawson/Bloomberg

Meetings of holders of 10 out of 12 bonds with a par value of about 3 billion euros, issued by Hellenic Railways Organization SA and Athens Urban Transport Organization SA and guaranteed by the government, either rejected the restructuring plans or failed to muster a quorum at March 27 meetings, according to a release from the Greek Public Debt Management Agency. Photographer: Simon Dawson/Bloomberg

Holders of Greece’s international bonds issued under foreign laws are pushing back against attempts to restructure their securities, stymieing the nation’s efforts to ease its debt load.

Meetings of holders of 10 out of 12 bonds with a par value of about 3 billion euros ($4 billion), issued by Hellenic Railways Organization SA and Athens Urban Transport Organization SA and guaranteed by the government, either rejected the restructuring plans or failed to muster a quorum at March 27 meetings, according to a release from the Greek Public Debt Management Agency.

Greece is insisting there aren’t funds to pay holdouts and that the deal domestic law bondholders were forced to accept, triggering losses of about 70 percent, was the best on offer. Opposition from foreign law bondholders leaves the country facing the prospect of defaulting on payments of coupons and principal, continuing to service the securities, or entering negotiations with bondholders.

“It is in Greek interests to threaten not to pay foreign holdouts now,” Gabriel Sterne, an economist at Exotix Holdings Ltd. in London wrote in a note. “It may not necessarily be in Greek interests to implement the threat.”

The nation yesterday failed to get a quorum to restructure 650 million Swiss francs ($716 million) of sovereign bonds. Further meetings for holders of Greece’s sovereign-issued foreign-law bonds are planned.

Debt Restructuring

Greece carried out the biggest-ever sovereign bond restructuring this month, forcing holders of 197 billion euros of bonds issued under domestic law to accept new notes with a 53.5 percent reduction in face value. The exchange was known as PSI, for private sector involvement.

A failure to pay on the foreign-law bonds still outstanding may trigger clauses forcing immediate payment of other obligations, or the unwinding of derivative contracts and even affect treaty agreements with other nations, according to Andreas Koutras, an analyst at ITC Markets in London.

The nation faces its first maturity on the international bonds on May 15, when a 450 million-euro floating-rate note falls due. The country has a 30-day grace period to make the payment, data compiled by Bloomberg show.

“We have repeatedly said that our funding plan, and funds, are sufficient for PSI size and style repayment,” Petros Christodoulou, head of the Greek debt agency in Athens, said in an e-mailed statement. “We have also said that no bondholder will get better economics than the PSI.”

The Greek bond exchange triggered credit-default swaps on its bonds and credit rating firms said the nation had defaulted under some of their definitions of default.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net


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