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Greek Bond Swap to Cost Creditors 21%

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Swaps of existing Greek bonds for new ones with longer maturity dates will cost private bondholders 21%, according to Greece’s deputy finance minister, who said Tuesday that exchanges for the new debt instruments would begin in August. The International Institute of Finance (IIF) estimates the voluntary exchange rate will be around 90%.

Reuters reported that Deputy Finance Minister Filippos Sachinidis said in a TV broadcast, “In the coming days, in collaboration with IIF, talks outlining the exact procedure that will be followed so that holders of Greek government bonds choose one of four options and proceed to a debt swap will be completed . . . this procedure will begin in August.”

Exchanges will allow extended maturities of up to 30 years, and the goal is to accomplish the swaps as quickly as possible to cut the period during which Greece is classified as in partial default. The exchanges, which are expected to contribute 37 billion euros ($53.601 billion) to the rescue for Greece, were agreed upon as part of the package put together last week at a euro zone summit meeting. The first meeting to begin implementation of the exchange is expected on July 28.

Sachinidis was quoted saying, “The goal is for this (bond swap) to last as briefly as possible. It appears that we will manage to secure a satisfactory participation to proceed with the exchange.”

Charles Dallara, head of the IIF, met with Greek Finance Minister Evangelos Venizelos on Monday and said that the voluntary exchange of bonds was based on continued financial support from the International Monetary Fund (IMF).