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Eurogroup president Jean-Claude Juncker (right) might be happier to see Greek finance minister Evangelos Venizelos in future, after investors agreed to swap their bonds for lesser ones. Yves Logghe/AP

Success for Greece as huge majority of investors agree to bond swap

The biggest sovereign bond swap in history will unltimately see 95.7 per cent of investors agree to write down their debts.

GREECE HAS CONFIRMED that an overwhelming majority of its bondholders have signed up to an unprecedented deal which will see the country knock over €100 billion off its national debt.

Holders of its sovereign bonds had until yesterday evening to participate in the deal, which is required in order to release the first funds under the country’s much-needed second bailout.

The finance ministry this morning said that 85.8 per cent of the holders of its Greek-issued debts had agreed to take part. Those investors account for just under €152 billion of bonds it currently has on issue.

Those bondholders will now take an immediate write-down of 53.5 per cent on the value of the bonds, and losses reaching up to 75 per cent when the lower interest rates are taken into account.

The high take-up of the programme means the government can activate a ‘collective action clause’ – pushing through a change to its national bond laws which will mean it can impose losses on some 95.7 per cent of its total bondholders.

While this cannot apply to Greek national bonds which were not issued directly from Athens – and which are therefore not subject to Greek laws – those investors have until March 23 to decide whether they will sign up to the deal.

Figures published by the finance ministry this morning said 69 per cent of the foreign bondholders had already signed up – and that number is likely to rise, with finance minister Evangelos Venizelos saying there would be “no further opportunity” for creditors to safeguard themselves from default.

A formal decision on whether the deal can formally be classified as a “default” will be made later today when the International Swaps and Derivatives Association convenes a committee to discuss the deal.

ISDA’s input is particularly important, as as the authoritative basis on which investors deem a ‘credit event’ to have taken place. If it has, anyone holding a ‘Credit Default Swap’ – a sort of insurance against a Greek default – can expect a payout.

Earlier: 12 major investors agree to write off parts of Greek debt >

Read: Eurozone finance ministers agree in principle on first Greek bailout payment >

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