PARIS (MNI) – Although the so-called deadline for Greece’s E135
billion debt swap was set to expire on Friday, it could be weeks before
it can be determined whether the deal has succeeded in achieving its
hoped-for 90 percent investor participation rate.

Friday’s deadline was set by Greece’s Finance Ministry in a letter
issued on Aug. 25 seeking to find out which banks and other institutions
owned the eligible debt and to obtain “non-binding” expressions of
interest in participating in the swap.

“The letter of inquiry is not a formal offer, and the detailed
terms of the proposed transaction have yet to be fully determined,” the
ministry said in a statement issued on Tuesday.

The Institute for International Finance, which is helping to
coordinate the debt swap, said it had no announcement to make on Friday.

“We have no plans to issue a statement,” said Frank Vogl, press
adviser for IIF, in an e-mail. “I think there may be some
misunderstandings about today’s so-called deadline.”

Vogl added: “I can only say that our IIF ‘preliminary indications’
are around 60% to 70%, but we would expect this to rise as the process
proceeds in coming weeks.”

The head of Greece’s Public Debt Management Agency, Petros
Christodoulou, told Market News in an e-mail on Friday that information
sessions for investors “will continue through the end of September and
the actual offer will take place in October.”

Analysts said that signifiant obstacles must be overcome before
banks would be willing to move from non-binding expressions of interest
to definitive participation.

“We cannot emphasize enough the implementation risks associated
with this exchange,” Barclays Capital analysts said in a research note.

The chief risks, the Barclays analysts said, are that the
fortification of Europe’s bailout fund, the European Financial Stability
Facility, has still not been approved by national parliaments and that
Greece still needs to reach agreement with official lenders on meeting
its bailout targets.

Inspectors from so-called troika, the European Commission, the
International Monetary Fund and European Central Bank, abruptly left
Athens on September 2 after a dispute with senior Greek officials over
Greece’s public budget deficit target for 2011. They are due to return
next week.

Greece also said in the Aug. 25 letter that it reserved the right
to cancel the debt swap if the 90% threshold was not reached.

Greek debt yields continued to soar on Friday amid rumors of a
possible default. Yields on 10-year Greek government bonds climbed by 42
basis points to 20.55%, while Greek 2-year note yields jumped nearly 2
percentage points to 57%.

–Paris newsroom +331 4271 5540; jduffy@marketnews.com

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