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Large Greek creditors “For” the PSI, small investors vote “Against”

05 March 2012 / 23:03:51  GRReporter
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BNP Paribas, FMS Wertmanagement, Commerzbank, CNP Assurances, Greylock Capital Management, ING Bank, Intesa San Paolo, AXA confirmed that they will participate in the programme for reducing the Greek debt (PSI), which must be completed by the end of this month. According to latest information, most German banks are expected to accept the 53.3 percent reduction of the nominal value of Greek government bonds. The German financial system holds a total of 15 billion euro in Greek bonds. Most banks have already registered in their balance sheets the reduction of the securities of about three quarters of their value. The bank, which has the largest package of Greek government bonds is FMS Wertmanagement. Its package is worth eight billion euro, the institution is willing to accept the debt restructuring, rather than its complete removal.

While publication in the Greek press show that the participation of private investors in the process of reduction of the Greek foreign debt is almost one hundred percent, Bloomberg reported that the German investment lobby DSW advises its clients not to accept the offer of the Greek PSI. "We advise investors holding securities with short maturity period not to accept the offer", says the CEO of DSW Mark Tuegler. He insists that once the new bonds have a maturity of 30 years, investors in bonds, which must be paid in 2012 will face an even greater loss.

Private owners of Greek government bonds must announce their participation in the process of debt reduction until the eighth of March this year. Greek government aims to attract 90% of the private investors having in mind that the threshold to proceed with the transaction is 75%. According to the management of DSW participation of less than 90% may revoke the voluntary nature of debt reduction and to enact the collective action clauses (CACs), which will include all investors without exception. Then, those who disagree with the conditions will not have much choice, but if the quota of the swap is over 90% the transaction will be done voluntarily and those refusing to participate in the PSI will keep the old maturity of the Greek bonds they’ve purchased.

The DSW investment group is based in Düsseldorf and it consists of about 25 000 small private investors and private individuals who have invested little to the overall picture, but considerable for themselves amounts in Greek government bonds. Since the end of February, the fund urged the Greek government to provide some clarity on how to they will proceed with individual investors during the exchange of the debt. According to the Greek online portal OnlineMoney there are three opportunities for small private creditors: 1. To accept the terms of the PSI and to take part in the process (in this case the bonds they hold will be exchanged with the new ones 53.3% lower bonds with 30 years maturity period) 2. To declare that they do not want to participate in the programme or 3. To ignore the invitation for participation. It is not known in what way the last two options are different, but if the collective action clause for individuals who have invested in Greek bonds is activated, they would not be able to get away with cutting.

Currently, Greek banks have accepted the role of intermediaries between individuals who have Greek bonds and the State in order to determine how many of them would support the PSI. Recent data suggest that they are about 9500 people, each of whom has invested less than 100 thousand euro in Greek government bonds. The Minister of Finance Evangelos Venizelos promised that small investors of this type will be excluded from the cutting of the debt, but later he took back his words. After a stormy debate it was heard that small private investors will be compensated in the event of activation of the collective action clauses, but this also did not prove to be 100% confirmed. Meanwhile, financial analysts, announced a "secret report" for internal use at the Institute of International Finance, claiming that the cost of bankruptcy of Greece would be much more expensive for the eurozone than providing financial assistance. According to the information there the bankruptcy of Greece will cost the countries from the currency union and the foreign investors about one trillion euro, rather than the financial assistance worth a total of 240 billion euro for the years 2010-2020.

Tags: Economy Markets PSI cirisis foreign debt
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