New Greek govt faces EUR 436m debt test

(ATHENS) - The new Greek government will face an early test when 436 million euros ($575 million) of debt, held by private creditors who turned down a swap, matures on May 15, the finance ministry said Thursday.

With general elections due May 6, the ministry said it did not plan to take any action but in the meantime Athens would work with the European Union and International Monetary Fund to find a solution.

Greece said Wednesday that it had completed a huge exchange of government debt held by private creditors worth nearly 199 billion euros ($262 billion) or 97 percent of the face value involved.

The swap cuts some 106 billion euros from Greece's near- and mid-term debt of over 350 billion euros, with investors losing most of their investment in Greek government bonds as a result of the swap.

The debt holders were given new bonds with a face value equivalent to 31.5 percent of the amount of the debt exchanged, plus 24-month notes from the European Financial Stability Facility, the eurozone's temporary rescue fund.

Athens had sought participation from private investors holding at least 75 percent of bonds selected or the debt swap would have been called off.

To maximise acceptance, it enacted so-called collective action clauses that made the exchange binding for bonds governed by Greek law if at least two thirds of the face amount held by bondholders was submitted to the swap.

The bond exchange was aimed to help Greece meet a wave of repayment deadlines this year and was a key part of a second EU and International Monetary Fund rescue to enable the country to rebuild its economy.

It was not immediately clear what would happen to those private creditors who refused the debt swap, with Athens insisting that there would be no going back on the exchange offer.

Some of the outstanding debt is set to mature on May 15, with more scheduled to come due on September 13.

When Greece was negotiating the reduction in private debt, then finance minister Evangelos Venizelos warned that private creditors who did not agree to the deal would not be reimbursed.

Any legal proceedings that followed would be exceptionally long and complex, Venizelos noted at the time.

The ministry did not restate that position on Wednesday however when it announced the end of the debt exchange.