Greece yesterday asked its foreign lenders for extra money to complete a bond buy-back that forms part of its bailout, with policymakers and analysts calling the scheme a success even though it narrowly missed its debt reduction target.
The scheme, intended to put Greece’s debt mountain on a more sustainable footing and unlock cash to avoid bankruptcy, had a maximum budget of €10 billion to buy back bonds trading at a huge discount to their face value of about €30 billion.
But Athens had to offer investors a higher-than-expected price, raising the plan’s funding needs to €11.29 billion if it is to buy all the €31.9 billion of bonds that investors offered.
Greece’s debt agency said it would buy back the entire sum offered if it got additional financing from its lenders.
“It is a good outcome, despite the need to increase the funding,” said Theodore Krintas, head of wealth management at Attica Bank. “The bottom line is that it reduces debt.”
The buy-back accounts for about half of a broader debt relief package that lenders agreed for Athens last month, and its success is essential to keeping the International Monetary Fund committed to a rescue plan mounted jointly with the EU.
IMF director Christine Lagarde has already signalled that she is satisfied with the outcome.
“I can only welcome the results that have been produced by the debt buy-back,” she said after Greece confidentially revealed the results to lenders.
Eurozone finance ministers and Lagarde are to discuss the buy-back in a euro group meeting today. If they deem it successful, they will release €34.4 billion in loans that Greece needs to help refloat its banks and its economy.
“I consider it likely that we can reach an agreement on paying the next loan tranche in the meeting tomorrow,” said Finance Minister Jutta Urpilainen of Finland, one of the sharpest critics of Greek reform efforts.
A eurozone official told Reuters late on Tuesday that the buy-back left a €450 million hole in their plan to cut the Greece’s debt to 124 per cent of GDP by 2020.
But analysts said the eurozone finance ministers should not find it difficult to tie up the loose ends today. Greece will pay an average price of about 33.8 per cent of face value on all series of bonds, the debt agency said – above estimates given at the time the scheme was agreed last month.