Greece and its private lenders will begin talks on a bond swap to cut 50 percent of the country's debt on Wednesday in Frankfurt, Greek newspaper Kathimerini said on Tuesday. without citing sources.
The talks are part of an EU bailout plan for the debt-laden country agreed last month. Under the plan, about 200 billion euros of Greek debt owned by private bondholders would be cut by 100 billion euros.
Greece will propose that for every 100 euros Greece owes, bondholders should receive between 10 and 20 euros in cash, depending on the maturities of the existing bonds they hold, Kathimerini said.
Bondholders would also receive between 30 and 40 euros in new bonds with a duration of between 20 and 30 years at an average coupon of 6 percent, the newspaper added.
Banks, represented by the International Institute of Finance (IIF), are likely to propose that the face value of 141 billion euros of bonds be cut by 50 percent, Kathimerini said.
The rest would be exchanged with EFSF-guaranteed bonds expiring in 22 years at a fixed coupon of 7 percent, or alternatively a floating coupon between 5.5 percent and 7.5 percent, it added.
An alternative proposal by the IIF, Kathimerini said, sets out a 37 percent haircut on 65 billion euros of bonds. The remaining debt would be swapped with new, 15-year bonds at a coupon of 8 percent.
Under both IIF proposals, the coupon would be linked to Greece's GDP, Kathimerini said.
Greece's new Prime Minister Lucas Papademos said on Monday that the country would publish very soon an official announcement to begin talks on the bond swap. Papademos's government is expected to receive a parliamentary vote of confidence on Wednesday.