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Greece Private Creditors to Meet in Paris Tomorrow on Debt Swap

Greece’s private creditors plan to meet in Paris tomorrow to discuss a debt-swap deal that’s contingent on the country securing a second aid package from European and international officials, Institute of International Finance spokesman Frank Vogl said.

The IIF is holding the meeting to go over technical matters so that if an accord between Greece and the so-called troika, comprising the European Commission, the European Central Bank and the International Monetary Fund, is reached, the debt swap could be implemented quickly, said two people familiar with the matter who declined to be identified because talks are private.

Private creditors are still prepared to accept an average coupon as low as 3.6 percent on new 30-year bonds in the exchange, said one of the people, who declined to be identified. While the framework of the swap and many of the details have been agreed upon, the deal can’t be completed until the government agrees on the terms with domestic political parties and the troika on the second financing package, the person said.

“We now are expecting the Greek leadership to discuss things with the troika and the Eurogroup,” Vogl said. “All elements of what will eventually be an agreement are contingent on other elements.”

IIF Managing Director Charles Dallara and Jean Lemierre, co-heads of the steering committee leading talks on behalf of creditors, need to brief investors and get their feedback on the debt swap after holding talks with Greece officials yesterday, Vogl said.

Discussions in Athens

Greek Prime Minister Lucas Papademos is set to meet with leaders of the political parties supporting his caretaker government today in Athens after delays plagued negotiations over the terms required for a 130 billion-euro ($172 billion) rescue package from official creditors. The government is struggling to arrange financing to avert a collapse of the economy, risking a new round of contagion in the euro area.

With the country facing a 14.5 billion-euro bond payment on March 20, German Chancellor Angela Merkel warned this week that “time is running out” to reach an accord.

The debt-swap deal with private bondholders, an element of the second rescue package, would slice 100 billion euros off more than 200 billion euros of privately-held debt. The rescue blueprint includes a net present value loss of 70 percent or more for bondholders in the voluntary debt exchange as well as loans that will probably exceed the 130 billion euros now on the table.

Even if a deal is reached, a question remains over how many of Greece’s private creditors will take part in the debt swap.

Paris Meetings

Papademos and Finance Minister Evangelos Venizelos had “constructive discussions” yesterday with Dallara and Lemierre and Deutsche Bank AG (DBK) Chief Executive Officer Josef Ackermann, the IIF said yesterday in a statement. Ackermann is chairman of the Washington-based IIF, an industry group representing more than 450 financial firms.

They discussed the private-industry involvement and the program that Greece is negotiating with the troika. The IIF representatives are going to Paris today to continue consultations with investors and creditors, the statement said.

Papademos agreed late yesterday on the terms of a debt-swap deal with representatives of the country’s private creditors, Naftemporiki reported, without saying how it got the information.

The creditors’ steering committee negotiating the debt swap includes representatives from banks and insurers with the largest holdings of Greek government bonds, including National Bank of Greece SA, BNP Paribas (BNP) SA, Commerzbank AG, Deutsche Bank AG, Intesa Sanpaolo SpA, ING Groep NV, Allianz SE and Axa SA.

Default Risk

Financial firms on the IIF’s private-creditor investor committee, a larger group of 32 members that includes the smaller steering committee, hold more than 47 billion euros in Greek sovereign debt, according to data compiled by Bloomberg from company reports.

Greece may have only three days left to avoid “outright default,” Thomas Mayer, chief economist at Deutsche Bank, said today.

“They have to make a payment of 14 and a half billion on an outgoing bond,” Mayer said in a radio interview today on “Bloomberg -- The First Word” with Ken Prewitt. “If they don’t have the money in the account at the time the payment is due, then they really default. Time is of the essence. I think we have maybe one, maybe two, maybe three more days but that’s it. And then it will be too late to avoid an outright default.”

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net; Maria Petrakis in Athens at mpetrakis@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net;

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