Greece's Public Debt Management Agency (PDMA) on Monday began the 10 billion euros (13 billion U.S. dollars) procedure, inviting private sector holders of Greek bonds to voluntarily exchange them at discount rates for European Financial Stability Facility (EFSF) notes.

 

The aim was to reduce Greece's debt load by a further 20 to 30 billion euros this year to ensure its sustainability in the next decade and open the way for the disbursement of the next bailout tranche to Athens under a deal with European Union and International Monetary Fund lenders.

 

 

 

The delayed rescue loans are vital to avert a disorderly Greek default and potential exit from the euro.

 

The move marks the second time in nine months that private bondholders are participating in a voluntary writedown of part of Greek sovereign debt. In March, Greece was granted a 100 billion euros writedown.

 

Since then, the face value of Greek state bonds has been reduced and now Greece offers participants of the debt buyback prices of some 30 euro cents to 40 euro cents on the face value, depending on maturities.

 

The success of the latest bond buyback scheme depends on the extent of the participation of bondholders. Greek state officials speaking anonymously to local media in Athens expressed confidence over the result, as last minute talks with representatives of the largest four Greek banks, which hold about 15 billion euros of bonds out of some 60 billion euros of eligible bonds, continued on Friday.

 

Greek Finance Minister Yannis Stournaras said the government would push through a law to shield bankers from possible lawsuits by shareholders over the losses.

 

Greek banks were severely affected by the debt crisis over the past three years and suffered losses under the previous debt writedown scheme. However, they are expected to join the new buyback plan in order to ensure vital funds for their planned recapitalization in coming months.

 

Analysts in Athens noted that this was not necessarily the case for hedge funds which might opt to exchange some 65 percent of the bonds they currently hold and keep to the rest to sell them at possibly higher prices in the future.

 

The bond buyback procedure is scheduled to end by Dec. 17.