Greece said on Friday it had clinched a “historic” debt swap, opening the way for an urgent second bailout to save the country from bankruptcy and the eurozone from a new crisis.
Private creditors tendered bonds amounting to 83.5 percent of debt covered by a deal to cancel half the amount owed — a write-off worth 107 billion euros ($142 billion) on the basis of full acceptance.
The Greek finance ministry revealed the 83.5-percent acceptance figure early on Friday. “This is a historic moment for the country,” government spokesman Pantelis Kapsis told private television station Mega.
“It enables us to go forward to stabilise the economy and to promote growth,” Kapsis said.
Germany’s finance ministry called the swap deal a “big step” towards stabilising the country and stressed that Greece had been handed a “historic chance”.
France’s Finance Minister Francois Baroin hailed the “good news and nice deal” for Greece.
IMF head Christine Lagarde, just before the official take-up rate was announced, said the risk of crisis in the eurozone has been “removed” for now.
“As we speak, it looks like it’s going through,” Lagarde said that the “real risk of a crisis, of an acute crisis, has been, for the moment, removed.”
The success of the debt swap is a vital step for Greece to be able to avoid a default as early as March 20 when it has to repay some debt. Default would be catastrophic for Greece and could cost the eurozone one trillion euros and send shockwaves around global financial markets.
It meets a central condition laid down by the EU-IMF for a far bigger overall bailout for Greece.
Eurozone finance ministers are to review the take-up figure for the swap in a conference call later on Friday.
The 83.5-percent figure falls within the range of take-up considered high enough to enact private bond scheme and sent Asian markets sharply higher on Friday.
Stocks in Tokyo closed at the highest level in seven months. European shares were mostly unchanged a day after sharp rallies on anticipation of the deal.
The participation is higher than the 75 percent threshold Greece had said it wanted to proceed with the swap and the Athens now intends to activate so-called collection action clauses that will force holdouts to also join the deal.
Greece “intends to accept the consents received and amend the terms of all of its Greek law governed bonds, including those not tendered for exchange,” the government said in a statement.
Once enacted, the clauses are expected to boost final participation in the debt swap to 95.7 percent, the ministry said.
But the clauses could also trigger anti-default insurance contracts, known as credit default swaps, whose net value was estimated at 3.2 billion euros in February.
The International Swaps and Derivatives Association, an organisation representing over 815 market institutions, is expected to determine later on Friday whether the Greek debt cut constitutes a credit event that would trigger the CDS’.
The International Institute of Finance, a global bank association which had helped broker the deal, on Friday welcomed the result which it said would give Greece “breathing space” to implement tough reforms.
“The very strong and positive result provides a major opportunity now for Greece to move ahead with its economic reform program, while strengthening the Euro area’s ability to create an economic environment of stability and growth,” said Deutsche Bank head Josef Ackermann, who also chairs the IIF.
The IIF’s managing director Charles Dallara added the voluntary exchange “reduces the risks of contagion in the markets, while it enables Greece to build on the strengths of the reform efforts themselves.”
And directors from the International Monetary Fund have tentatively planned to meet to weigh a new loan for Greece on March 15, spokesman Gerry Rice said on Thursday.
The EU and IMF have said that a participation rate of 95 percent is necessary to reduce Greek debt to a sustainable level of 120 percent of gross domestic product in 2020.
The writedown is the biggest attempted so far, overshadowing Argentina’s $82-billion default in 2002, the equivalent of 73 billion euros at the time.
It is designed to erase more than 100 billion euros ($132 billion) from Greece’s near and mid-term debt and replace it with new maturities.
The exercise is meant to make repayment of the debt, currently at over 350 billion euros, more sustainable in the immediate future, thereby giving the struggling Greek economy much needed breathing room.
Failure to reach a deal would have increased the danger of a disorderly default that the IIF warned could cost eurozone nations one trillion euros.
This could have come as quickly as March 20, when Athens was due to reimburse a three-year bond worth 14.4 billion euros.