–Redeeming E435 Mln Of Bonds Maturing May 15 Would Be A Reversal

ATHENS (MNI) – In a potential reversal of policy, Greece is now
considering the possibility of redeeming E435 million worth of
government bonds held by creditors who refused to accept Athens’ debt
exchange deal earlier this year, a well-placed government official told
MNI.

The E435 million in question, part of about E6.6 billion in bonds
held by the recalcitrant creditors, mature on May 15. It could hardly
come at a worse time, with Greece in turmoil and lacking a government
following last Sunday’s inconclusive and fractious parliamentary
elections. The political chaos is the main reason for Greece’s rethink
on the subject.

Greece and its Eurozone partners had originally agreed not to
redeem the bonds of PSI holdouts, in order not to anger the majority of
creditors who accepted big haircuts on their Greek bonds by
participating in PSI. But with no government in place, the thought of
entering into a technical default, even for a short period, is making
some officials in Athens nervous.

Greece’s caretaker Finance Minister Filippos Sachinidis sent a
suggestion to caretaker Prime Minister Lucas Papademos that Greece
should pay off the bonds in order to avoid problems at a time when the
country has no real government in place, the Greek official said.

Sachinidis, he said, argued that Greece might be sued by the
holders of the defaulted bonds at a time when it would not be in a good
position to cope with such a lawsuit.

Papademos has discussed the bond redemption issue with Greece’s
President Karolos Papoulias and asked the president to brief all the
political party leaders on it over the weekend and try to take a joint
decision on whether to pay off the bonds or not. Papademos plans to
present all the options with pros and cons rather than make a single
suggestion, the official said.

Eurozone finance ministers are expected to discuss the issue at
their meeting in Brussels Monday evening, but it is unlikely they will
agree. The EMU ministers, known collectively as the Eurogroup, have so
far favored defaulting on the bonds of non-PSI private creditors.

Even if Greece decides to pay off the E435 million falling due next
Tuesday, it would only be a one-off decision. It doesn’t mean Athens
would also pay the private creditors holding the remaining E6.2 billion
of non-PSI bonds, which mature later.

In addition to defaulting or paying, another option would be to
delay a decision by two to three weeks by simply extending the maturity
on the bonds scheduled to expire on May 15.

–Athens bureau, a_papamiltiadou@marketnews.com

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