Business, Finance & Economics

Greece's six major banks agree to bond-swap deal


Break out the Greek mythology cliches!


Louisa Gouliamaki

The Greek government said Tuesday that the country's six largest banks have agreed to the controversial bond-swap deal that aims to cut more than 106 billion euros ($140 billion) from the country's national debt.

According to the Wall Street Journal, Greece believes that it will achieve 75 to 80 percent participation from investors despite needing over 90 per cent participation in order to avoid the activation of collective-action clauses.

The bond-swap deal, which will include all investors in Greek debt, is a part of the latest 130 billion euro bailout package that will see banks exchange their current bonds with new ones with later maturity dates and lower returns, according to the Telegraph.

The Greek government has given a deadline of this Thursday to accept the deal.

Read more on GlobalPostGreek parliament approves debt swap deal

To that end, the government has recently been pressuring investors to accept the deal or face the possibility of losing their investments.

"“This is the best offer,” said Greek Finance Minister, Evangelos Venizelos said to Bloomberg Television in a televised interview Tuesday. “This is the best offer because this is the only one, the only existing offer.”

German, British, French and Greek banks holding the debt are expected to lose billions - up to 53.5 percent of the bonds value - in the vonluntary deal.

The Telegraph reported that 'sweeteners' were added in the deal to encourage investors to take part.

Twelve banks, including French giant BNP Paribas and the German Commerzbank, and many other investors have already agreed to the deal.

According to Bloomberg, France will be the country most affected by the deal, as BNP has more Greek bonds in its portfolio than any other bank.

BNP already wrote down its Greek bonds by 75 per cent, a move that saw the bank take a 50 percent drop in profits in the final quarter of 2011.