Fitch was the third agency to downgrade Greece into default, after Moody’s and Standard & Poor’s. The Fitch ratings agency downgraded Greece to “restricted default” over the bond swap - a move that had been expected. The settlement date for Greek-law bonds is set for Monday, and April 11 for foreign-law bonds. The deadline for those holding foreign-law bonds was extended to March 23.Ĭreditors holding Greek-law bonds who refused to sign up will be forced into the deal, with the Cabinet approving during a meeting Friday the activation of legislation known as “collective action clauses.” Of the investors holding the €177 billion ($234 billion) in bonds governed by Greek law, 85.8 per cent joined. “A window of opportunity is opening” with the success of the deal to reduce the country’s €368 billion debt by €105 billion, or about 50 percentage points of gross domestic product, he said. and I believe everyone will soon realize that this is the only way to keep the country on its feet and give it a second historic chance that it needs,” Finance Minister Evangelos Venizelos told Parliament. “We have achieved an exceptional success. The deal is also a key condition for Greece to receive a €130 billion ($172 billion) package of rescue loans from other eurozone countries and the International Monetary Fund. The bond swap was a radical attempt to pull Greece out of its debt spiral and put its shrinking economy back on the path to recovery. Without the agreement, Greece would have risked defaulting on its debts in two weeks’ time, an event that would have sparked turmoil in the financial markets and sent shock waves through the other 16 countries that use the euro.įollowing weeks of intense discussions, the Greek government said Friday that 83.5 per cent of private investors holding its government debt had agreed to a bond swap that would involve them taking a cut in more than half the face value of their investments with softer repayment terms for Greece. The agreement paves the way for Greece to receive an enormous second bailout in the hopes of containing the crisis before it drags the entire continent further into chaos. He urged bondholders to 'wait until they receive official notification from Athens', adding that 'legal steps' against the bond swap would then be 'prepared' by his organization.ATHENS, GREECE - Greece’s creditors agreed Friday to take cents on the euro in the biggest debt writedown in history, providing much-needed breathing room for European nations living beyond their means. Marc Tüngler, head of the German Association for Shareholder Protection (DWS), told dpa news agency that small savers were 'not involved' in negotiations for the bond swap. In the meantime, German shareholder rights activists have called on the Greek government to exclude smaller private investors from the haircut. However, US-based ratings agency Fitch said Wednesday that in that case, all Greek debt would be 'cut to default grade', meaning Greek bonds would no longer be accepted by central banks as loan collateral. If Greece would get 'at least 66 percent' of its creditors to sign up to the deal, he said, the government planned to 'impose a Collective Action Clause' which would 'force' any reluctant investors to accept it too. Greek Finance Minister Evangelos Venizelos said at least 90 percent of private creditors needed to accept the deal for the bond swap to become valid. The aim is to reduce Greece's debt mountain by 107 billion euros, in support of efforts to lower the country's national debt from a currently unsustainable 160 percent of annual economic output to 120 percent by 2020. Bondholders are expected to take a nominal loss of 53.5 percent on their holdings, which equates to a real loss of 73 to 74 percent. The debt swap deal is a precondition for Greece to receive a second rescue package worth 130 billion euros ($174 billion) from eurozone countries and the International Monetary Fund (IMF).Īs part of the deal - also known as a haircut - private creditors are asked to trade in their Greek bonds for new ones offering lower interest rates and longer maturities. 'Greece has made a titanic effort to finalize the decision on PSI and conditions for granting the aid,' Prime Minister Lucas Papademos told the cabinet meeting that approved the final text. Private investors such as banks, insurance companies and investment funds as well as ordinary savers holding Greek bonds were issued a public offer Friday, enabling the Greek government to conclude the debt swap on a first set of bonds by March 12, Athens announced on Friday.

Greek private debt writedown