Emily Vogl, Frank Vogl
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Greece Financing Offer: Statement by the IIF Board of Directors
Brussels, Belgium, July 21, 2011 — The IIF Board announced today the attached IIF Financing Offer for Greece. The program offers a menu of new instruments to investors in order to mobilize voluntary participation of investors with a target participation rate of 90%. This will provide financing to Greece of €54 billion from mid-2011 to mid-2014 and a total of €135 billion from mid-2011 to end-2020.
Greece’s debt profile will be improved substantially with the exchange and roll-over program extending average maturities of privately held claims from 6 to 11 years. The stock of debt will be reduced by €13.5 billion through the bond exchange program and potentially by €24.3 billion (or 10.6% of current GDP) including through a debt buyback program (estimated to be €20 billion). The debt exchanges, lending and roll-overs will take place at rates that are broadly comparable to that being extended by the EU (see attached Financing Offer and Term Sheet). The new instruments will have significantly longer maturities up to 30 years.
Dr. Josef Ackermann, Chairman of the Board of the Institute, stated, “We believe that taken together with the intention of the EU to improve the terms of its financial assistance to Greece, the recently strengthened economic reform program of the Greek government and the additional support of the IMF, this offer can contribute substantially to improving the competitiveness of the Greek economy.”
Mr. Charles Dallara, Managing Director of the IIF added, “With this offer, the global investor community is stepping forward in recognition of the unique challenges facing Greece. The removal of financing uncertainties will allow Greece to focus on the key elements of the reform program itself—further fiscal adjustment, revenue enhancement, privatization, and other structural reforms—which can lay the basis for renewed growth.”
As explained in the Financing Offer, investors will be offered four new instruments in addition to the opportunity to participate in a debt buyback program to be established by the Greek government in consultation with the official sector. The instruments are structured to attract voluntarily a wide range of investors. The four instruments involve:
- A Par Bond Exchange into a 30 year instrument
- A Par Bond offer involving rolling-over maturing Greek government bonds into 30 year instruments
- A Discount Bond Exchange into a 30 year instrument
- A Discount Bond Exchange into a 15 year instrument
For instruments, 1, 2 and 3 the principal is fully collateralized by 30 year zero coupon AAA Bonds. For instrument 4, the principal is partially collateralized through funds held in an escrow account. It is assumed that investors will select among the four instruments in equal proportions of 25% of total participation.
Dr. Ackermann stated, “This offer is part of a comprehensive package which involves a balance of interest for all parties. Greece will benefit from the improved EU terms, the support of the IMF, and the substantial financing and debt reduction coming from the private sector. The EU will benefit from the voluntary support by the private investor community and the very real prospect of drawing a line under this exceptional support for Greece. The private investor community will benefit from a more stable financial and economic environment.”
Emily Vogl, Frank Vogl