- Associated Press - Monday, March 5, 2012

BRUSSELS (AP) — A dozen banks, insurers and investment funds holding Greece‘s bonds will participate in a massive debt-relief plan for the country, the group representing private creditors in the talks said Monday.

The statement from the Institute of International Finance comes amid concerns that not enough investors voluntarily will swap their Greek government bonds for new ones with a much lower face value, longer repayment deadlines and lower interest rates.

Private creditors have until Thursday night to sign up for the bond swap, which could slice as much as 107 billion euros ($141.5 billion) off Greece‘s 350 billion euro ($462.7 billion) debt pile. Investors who participate would lose about 75 percent of the value of their overall bond holdings.

However, without the debt relief, Greece won’t get a second, 130 billion euro ($172 billion) bailout from the other euro countries and the International Monetary Fund and default on its debts, likely leaving investors with much bigger losses.

The 12 big investors that have promised to participate in the plan include German insurer Allianz, French bank BNP Paribas, and Germany’s Commerzbank and Deutsche Bank, as well as Greece‘s Eurobank EFG and National Bank of Greece, the IIF said. The banking group did not say how much Greek debt these institutions hold.

The participation of these investors doesn’t come as much of a surprise, as they were closely involved in negotiating the deal. Many of them also have close links to eurozone governments, which will be funding the bailout.

The bigger question will be whether less traditional bond investors, such as hedge funds that bought the bonds at a steep discount, will also sign up.

If not enough investors participate voluntarily, Greece has threatened to force losses on holdouts. That, however, could trigger payouts on so-called credit default swaps — complex financial products that act as bond insurance — which the eurozone fears could cause panic on financial market.



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