Greece to begin bond buyback plan to begin next week

Greece will launch a bond buyback programme agreed with EU and IMF creditors "early next week", Greek Finance Minister Yannis Stournaras said on Wednesday. "The success of the operation is a patriotic duty, it is a question of credibility" for Greece, Stournaras said, while adding that the government had an alternative plan in case the operation, meant to be completed by December 13, failed. The scheme, which is tied to the latest rescue package for Greece, is expected to involve the voluntary purchase of debt bonds issued by Greece held by private creditors. Under the terms of the complex package of measures agreed in Brussels on Tuesday, the International Monetary Fund and the eurozone agreed to release 43.7 billion euros ($57 billion) in four instalments from December to March to enable Greece to avoid bankruptcy. Stournaras said financing for next week's buyback plan would come through 13 billion euros in fresh loans from European rescue funds and would be in addition to the new rescue plan agreed in Brussels. The value of Greek bonds has plunged in value as the debt crisis has risen in intensity and since a massive debt writedown by private bondholders at the beginning of the year. Greek debt agency head Vassilis Mastrokalos said potential participants in the buyback plan stood to turn a profit though he declined to reveal the price to be offered. Greek sovereign debt currently trades at an average of between 28 and 29 percent of face value, Mastrokalos said, up slightly from 25 percent of face value in March. Greek news reports said the offer would be about 35 percent of face value, but it remains to be seen if the remaining private holders of the country's debt, especially hedge funds, will accept the offer. Hedge funds and private dealers, who often look for high-risk opportunities that regular investors shy away from, could hold out for a better offer down the road. In March, Greece's private creditors already agreed to write down around 107 billion euros in Greek sovereign bonds and many institutional investors such as banks and insurance companies have completely written off Greek debt from their balance sheets. By using newly borrowed money to buy back its sovereign bonds at a heavy discount, Greece reduces the total burden of debt in what amounts to a refinancing scheme. Analysts at the Greek bank Eurobank said they expected the operation to target the purchase of half the 62.3 billion euros in Greek sovereign debt still held by private creditors. Mastrokalos, who spoke alongside Stournaras in announcing the buyback offer, said the programme was "rather complicated". The Athens stock exchange closed down 2.87 percent.