Greece’s Debt Buyback May Address Holdouts, Troika Says

Greece’s debt-buyback operation may extend to holders of almost 4 billion euros ($5.2 billion) of government bonds who opted not to participate in the country’s debt restructuring earlier this year, the biggest in history.

The buyback will “address” the holders of bonds governed by non-Greek law who refused to tender them in the 200 billion- euro debt swap in March, hoping to get paid in full, according to an updated draft of Greece’s debt-sustainability assessment from the troika comprising the European Commission, the European Central Bank and the International Monetary Fund.

The Greek buyback is part of a package of measures approved by euro-area finance ministers this week to cut the nation’s debt. While Greece has gotten pledges for 240 billion euros of aid, the funds have been frozen since June as the government tries to get its bailout program back on track after it was disrupted by two elections and a deepening recession.

The buyback, which Finance Minister Yannis Stournaras said will be unveiled next week, will target 62 billion euros of new bonds issued after the debt swap. Greek banks hold 15 billion euros of the new bonds, while the country’s pension funds hold 8 billion euros.

The deal aims to bring Greece’s debt down to 124 percent of gross domestic product in 2020 from the 190 percent it was projected to reach in 2014 without the measures.

More Aid?

Other steps mentioned in the report, which was posted on the Dutch government’s website and is dated Nov. 27, include forgoing a reduction in Greece’s Treasury bill stock, which pares Greece’s financing in the next two years by 9 billion euros, and postponing a build-up of the Treasury’s cash buffers.

Dutch Prime Minister Mark Rutte told Bloomberg News yesterday that Greece may need more financial help to stay in the euro.

“We now have a menu, an approach which brings the debt of Greece back into the realm of what we anticipated when the second package was installed in February,” Rutte said.

The troika also said it foresees earnings from ECB holdings in Greek bonds through its Securities Markets Program being returned to Greece via euro-area members.

The IMF has set the 2020 debt-reduction target as a condition for continuing to fund a third of Greece’s bailout program. IMF Managing Director Christine Lagarde said after the euro-area finance ministers’ meeting that the fund will examine the results of the buyback before deciding whether to approve disbursement of additional aid.

Finance ministers plan to make a formal decision on Greece’s 34.4 billion-euro disbursement by Dec. 13. The ministers included no details in their statement of how the buyback would be implemented or funded, or specifics about the size and what would count as success.

To contact the reporters on this story: Maria Petrakis in Athens at mpetrakis@bloomberg.net; Marcus Bensasson in Athens at mbensasson@bloomberg.net

To contact the editors responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net; Craig Stirling at cstirling1@bloomberg.net

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