The Greek government’s bond buyback closes at noon London time. The deadline was extended from Dec. 7, when the amount tendered was approaching the government’s target. Greece plans to buy back debt for 10 billion euros, at about a third of face value, paying with money the country has borrowed from Europe’s bailout fund.
The operation will enable Greece to receive a new tranche of funding from the International Monetary Fund and the European Union and lower the cost of debt for the country. If the targets are achieved, this will be good news for Greeks.
Still, some of the biggest winners could be investors who hold onto Greek bonds: at each step it looks increasingly likely that Greece will remain in the euro and eventually pay off its debts — so, although not all agree, those who hang on may get a much higher proportion of the bonds’ face value back.
Hans Humes, president of the New York-based Greylock Capital Management LLC, said his hedge fund would be tendering only part of its Greek debt because it’s “going to be a very good investment.” The yield on Greek debt holdings, he said, “is extremely high and exceeds anything else in Europe.”
“The rational investor will hold out,” Nomura Holdings Inc.’s Dimitris Drakopoulos and Lefteris Farmakis wrote in a report on Nov. 30.
The Greek government never explained why it had to extend the deadline for the buyback to today. It would be ironic that the extension was due to foreign investors’ reluctance to sell Greek bonds, believing greater returns are to be had in coming years — therefore forcing Greek banks and pension funds to tender more of their own holdings.