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A Positive Sign for Greece in Debt Buyback

Macduff Everton | The Image Bank | Getty Images

Greek and foreign bondholders offered the targeted 30 billion euros ($38.8 billion) in a debt buyback that is key to the country's international bailout, a Greek government official said on Saturday, suggesting the plan had broadly succeeded.

The plan is central to efforts by Greece's euro zone and International Monetary Fund lenders to cut its debt to manageable levels and unlock more than 30 billion euros of rescue loans the country badly needs later this month.

It accounts for about half of a broader, 40-billion euro EU/IMF debt relief package for Athens agreed in November.

Under its terms, Athens will spend up to 10 billion euros of borrowed money to buy back bonds with a nominal value of about 30 billion euros.

Since the bonds are to be bought far below their nominal value, the country's net debt burden would fall by about 20 billion euros.

"The buyback went well in broad terms. The amount offered by investors was within the range expected, about 30 billion euros," the official told Reuters on condition of anonymity.

Greek banks, which hold about 17 billion euros of bonds, already announced on Friday they would participate in the scheme. Two Cypriot lenders also said they would offer their bonds.

Foreign investors have offered between 15 and 16 billion euros worth of bonds, Greek newspapers reported on Saturday, citing initial estimates without saying how they got them.

Athens' hopes of drawing enough foreign investors to the scheme grew after it announced better-than-expected terms this week, with price ranges at a premium over last week's prices. The government also said it would shield Greek bankers from possible shareholder lawsuits stemming from the buyback.

A deadline to submit offers expired on Friday. A Greek official said Athens would not make any official announcement until Monday on the interest it had received.

Hedge funds, which bought the debt at rock-bottom prices when it was feared the country would exit the euro, are estimated to hold a large part of Greek debt and the offer was seen as good enough to make them a nice profit.

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