“There was a small possibility that for whatever reason, the participation would be so high that the CACs may not need to get triggered,” Pawan Malik, managing director of Navigant Capital, said in a Bloomberg Television interview. “For the markets this may be a mild negative today.”
The writedown is a key element in European leaders’ efforts to turn the tide against the crisis that first emerged in Greece in late 2009, then forced Ireland and Portugal to follow Greece in requiring bailouts.
Germany and France, Europe’s two biggest economies that have steered the euro-area’s response to the crisis, welcomed the debt-swap take-up. The swap was a “great success” and “good news,” and “hits all the objectives we set ourselves,” French Finance Minister Francois Baroin said on RTL Radio.
Chancellor Angela Merkel is “pleased” about the “high level of participation of private creditors,” Steffen Seibert, her chief spokesman, said in Berlin. It is “an encouraging result that will help put Greece on a path to stability. What’s important now is for Greece to seize the opportunity offered by this debt swap, meaning it implements the agreed programs.”
Greece’s largest banks, most of the country’s pension funds and more than 30 European banks and insurers including BNP Paribas SA and Commerzbank AG, had said they would agree to the offer before it closed yesterday at 10 p.m. Athens time.
In the exchange, investors will receive new bonds with a face value of 31.5 percent of the old ones together with notes from the European Financial Stability Facility. The new debt is governed by English law and comes with warrants that will provide extra income in years when Greek economic growth exceeds thresholds. The net present value loss for investors is more than 70 percent.
“Despite all the justified happiness about this issue we have to note that Greece is only buying time,” Michael Kemmer, general manager of the BdB Association of German banks, said in an interview with Deutschlandfunk radio. “This is an important step -- the private sector showed solidarity. That’s good, but the work has only just begun.”