Greek Banks Poised to Help Debt-Buyback Program

ATHENS—Greece's banks are ready to hand over up to 100% of the Greek government bonds they hold for the country's debt-buyback program, a senior banking official said Friday, marking a significant step toward the success of the plan.
According to the official, Greece's top four lenders, which combined hold some €15 billion ($19.5 billion) of Greek government bonds, are set to participate fully in the deal that winds up Friday evening and is part of a plan by Athens to reduce its debt and pave the way for the country's next aid tranche.
The Public Debt Management Agency gave bondholders until 5 p.m. London time to make offers of how many bonds they would sell and at what price.

"The Greek banks are 100% committed in supporting the republic in its debt-reduction quest," the official said.
However, the exact amount of bonds local lenders will contribute to the plan will depend on the level of interest shown by foreign funds and banks, according to local press reports. Local media say that if foreign investors respond strongly to the offer, Greek banks might offer up only part of their portfolio, between 75% to 80% and hold on to the balance.
Greece is hoping to retire roughly half the €63 billion in debt the country owes to private creditors, something demanded by the country's European and international creditors in exchange for releasing fresh aid to Athens. The buyback must be completed by Dec. 12, the day before European finance ministers are set to decide on whether to greenlight that aid.
Under the plan, Greece will offer as much as €10 billion to buy back that debt, offering a maximum price of between 32.2 euro cents and 40.1 euro cents on the face value of the debt. Greece hopes that with its €10 billion it can attract offers of as much as €30 billion of bonds, shaving €20 billion of debt.
The debt agency, which is conducting the tender, will decide the final price and amount of bonds that would be bought back. Investors who sell their bonds to the government will get notes of equal value issued by the European Financial Stability Facility, the euro zone's temporary bailout fund.
The four leading banks—National Bank of Greece SA, ETE.AT -5.52% Eurobank Ergasias SA, EUROB.AT -4.37% Alpha Bank AE ALPHA.AT -5.88% and Piraeus Bank SA TPEIR.AT -5.32% —have all scheduled board meetings Friday to discuss the deal.
As a quid-pro-quo for participating in the deal, Greece's finance minister said Friday that the government would move to shield bank directors from any possible shareholder lawsuits in the future relating to the buyback. In a radio interview, Yannis Stournaras said that the government would legislate an indemnity protecting board members, like it did earlier this year when Greece undertook a mammoth €200 billion debt restructuring.


By ALKMAN GRANITSAS and STELIOS BOURAS —Nektaria Stamouli and Philip Pangalos contributed to this article
 .wsj.com
7/12/12
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