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Greece's decision to pay holders of 435 million euros ($553million) in international bonds that matured on Tuesday threatensto dissuade investors from participating in future eurozonerestructurings. Greece said it will pay the full amount of an issue leftoutstanding from last month's 206-billion-euro debt exchange.Greece said then that the swap, which wiped out more than 100billion euros of debt and half the principal owed investors, wasits "best" and "only" offer. The bonds paid off at par on Tuesdaywere as low as 66.5 cents on the euro in December, data compiled byBloomberg show. "Next time that issue comes around, and it might be in Greece or itmight be in Portugal, the temptation will be to try and hold out,"said Michael Hampden-Turner, a credit strategist at Citigroup Incin London. Europe's debt crisis is heating up again as voters reject austeritymeasures designed to reduce debt and deficits amid concern thatthey're damaging the region's economy. Yields on Italian five-yearnotes rose above 5 percent for the first time since Jan 31, andthose on Spanish 10-year bonds are the highest in more than fivemonths. About 6 billion euros of foreign-law bonds issued by Greece remainoutstanding. Greece, whose leaders said they'd hold new elections after days ofpolitical wrangling failed to create a new government, faced adilemma. That's because reneging on the payment would have been aso-called hard default that may have triggered derivativescontracts and cross-default clauses requiring the settlement ofother bonds that weren't exchanged last month. "Greece had no choice" but pay, Hampden-Turner said. "In apolitical power vacuum, there's no one to make a bargain." The notes due on Tuesday were issued under English law and weren'taffected by legislative changes that Greece employed to forceholders of domestic-law securities to take losses. About 3.3billion euros of the foreign-law securities issued or guaranteed byGreece that are still outstanding have cross-default clauses,according to Jeroen van den Broek, a credit strategist at ING BankNV in Amsterdam. "The headline of a multi-billion-euro cross-default as aconsequence of not repaying holdouts would probably be consideredmore of a negative" than hurting prospects for futurerestructurings, van den Broek said. Greece said on March 9 that investors tendered 152 billion euros ofGreek-law bonds, or 85.8 percent of the amount outstanding, and 20billion euros of foreign-law debt. It said no better offer wouldcome. The note maturing on Tuesday was among the international bondseither issued by the government or with its guarantee, whose ownersare holding out for a better deal than offered under Greece's debtrestructuring. 'Valueless statements' "It's going to be very difficult to restructure other countries'debt," said James Campbell, a partner at law firm PillsburyWinthrop Shaw Pittman LLP in London. "How will they persuade anyoneto participate on a voluntary basis if they've seen that statementsmade in Greece are valueless?" Bondholders who took part in Greece's debt swap, known asprivate-sector involvement, or PSI, have seen the value of thesecurities they received plunge. The new 10-year note fell to a record 13.92 cents on the euro afterbeing quoted as high as 28.78 cents on March 20, according toBloomberg Bond Trader prices. Investors demand 28 percentage pointsmore in yield to buy Greek debt rather than similar-maturity Germanbonds. The price of Greece's 2 percent bond maturing in 2023 sank belowthe 19.005 closing level of the bond it superseded. The securityhas tumbled as talks over the formation of a new governmentre-ignited concern Greece won't meet the terms of two internationalbailouts, increasing the risk it will leave the euro currency blocand fail to pay back its creditors. I am an expert from polysolarpanel.com, while we provides the quality product, such as China Solar Charging Station , Mono Solar Panels Manufacturer, Solar Charging Controller,and more.
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