BRUSSELS (MNI) – The debt swap agreed by private Greek creditors
early Tuesday is a solid deal for investors despite the increased
haircut they were obliged to take, said Charles Dallara, managing
director of the Institute of International Finance.
“The losses are going to be substantial, but there is a longer-term
benefit to the system from having an orderly negotiation,” Dallara told
a press conference here. The losses, officials said, would be above 70%.
The IIF agreed to accept a nominal haircut of 53.5% on private
investor holdings of Greek government bonds early Tuesday, up from an
initially agreed write-down of 50%
The major benefit for both Greece and investors, Dallara said, was
that a disorderly default was avoided. Such a default would have led to
a substantial increase in Eurozone market turmoil, he said.
Other benefits to the swap, he said, were that the new bonds in the
swap would be issued under English law, providing investors with
additional protections. The bonds also pay higher interest if the Greek
economy outperforms the baseline forecast of official lenders.
“This gives us a reasonable but contained upside,” he said.
For the Eurozone, Dallara said the deal provides the seed of an
eventual return of investor confidence to the single-currency bloc.
“The inability of Eurozone authorities to find common ground here
raised doubts in the minds of investors that has weighed on confidence,”
he said.
Dallara said he was hopeful of good investor participation in the
deal and declined to comment on the possible effects if investors
shunned the deal. He said he would view negatively the imposition of
collective action clauses to force reluctant investors into the deal.
–Brussels newsroom; jduffy@marketnews.com
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