finance168財經學院(百萬部落格)

Greece announced Friday that its private-sector creditors will take part in a historic restructuring of the government's debt, setting the stage for the nation to secure more bail-out money and skirt a messy default.

Investors agreed to restructure €172 billion worth of Greek bonds, which represents 85.5% of the total €206 billion held by the private sector, according to the Greek finance ministry. Another 69% of investors who own Greek bonds not issued under Greek law agreed to restructure roughly €20 billion.

Under the terms of the restructuring, bondholders stand to lose up to 75% of their investment by writing down the value of Greek bonds by 53.3% and exchanging the debt for securities with a lower interest rate.

The deal is expected to eliminate over €100 billion from Greece's debt load and reduce its funding costs over the next few years, according to the Institute of International Finance, which represents the private sector.

Following similar moves by other ratings agencies, Fitch downgraded Greece's credit rating to "restricted default" Friday, saying it will reinstate the nation's credit rating once it has issued new debt securities to investors.

Greece also extended the deadline for investors who own government bonds that are not subject to Greek laws to participate in the restructuring to March 23. A small portion of Greek government bonds are governed by foreign laws, mainly British, and are therefore not impacted by the collective action clauses.

The nation at the center of Europe's debt crisis, Greece has been struggling with an unsustainable level of debt and an economy that has been in recession for years. Under its second bailout program, Greece has agreed to implement a series of austerity measures and undertake broader reforms to make its economy more competitive.

The goal is to cut its debt to 120% of economic activity by 2020. But many economists say even that level would still be a heavy burden to bear and that Greece may need additional support to avoid default.

Greece's so-called official sector creditors, such as the European Central Bank, own billions of euros worth of bonds that were not subject to the terms of the restructuring announced Friday.

Source URL: http://money.cnn.com/2012/03/09/markets/greece-creditors-default/index.htm?iid=SF_BN_River