The Greek PDMA released the final results for the Greek bonds buyback. The total principal offered was €31.9bn for which €11.29bn in EFSF 6-month Bills will be needed (compared to the originally anticipated €10bn amount) while the weighted average purchase price was 33.8%. The Annex contains a breakdown per bond series:
My initial comments:
- The purchase price achieved for every bond series is equal to the maximum price allowed in the auction. So it seems that the size of the auction allowed bondholders (which were at least 40% foreign) to achieve the best price offered.
- In the case of short-term series (2023-2025) only 40% of the principal held was offered. This percentage increased to 50% for 2026/2027 and to 55% for the longer dated series. Bondholders decided to mainly exchange long-term bonds (which would probably become illiquid anyway after the buyback) and hold on to shorter term ones which provide for push-to-par mechanics.
- Total principal write-off will be close to €20.6bn. Since each series pays €987mn till 2023 and EFSF interest will be deferred for the next 10 years, Greece will manage to avoid paying interest for €20.6bn principal completely and another €11.3bn till 2023. That’s around€ 6.5bn (for €20.6bn) and €3.5bn (for €11.3bn) for a total close to €30bn. As a result, outright debt reduction will be close to €27bn till 2023 plus another €3.5bn in deferred interest payments.
- Since domestic institutions seem to have offered almost 100% of their holdings and pension funds hold €7.9bn it will be almost impossible to enable the bond CAC’s in the future, especially since they can only be enabled for all series simultaneously and they require a 66% majority. In other words, remaining holders are now much more secure.
- Greek banks seem to be the main losers. Although they ‘ve probably calculated fair value around 21-25 (which means they ‘re making a small profit right now), they will lose on future interest payments and amortized principal. Their future outlook is much worse since they don’t have GGB profits to look into. How the Cypriot banks participated remains to be seen.