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Dow Jones reports that Greek officials expect to activate collective action clauses that would coerce private holders of Greek bonds to exchange their securities for new bonds with a lower face value and longer maturities.This bond swap deal constitutes the cornerstone of the second Greek bailout. Triggering a CAC is expected to trigger a credit event, where credit default swaps (insurance contracts on Greek bonds) would be paid out.
The news agency cited official sources, who also said that 75 to 80 per cent of bondholders were expected to participate in the deal—enough to vote to use the collective action clause but not sufficient to make the kind of progress EU leaders want towards alleviating Greece’s public debt burden.
However, these participation expectations are also worrisome should they miss expectations even by a small margin. Greece can only go through with the bond swap deal if a full 75 per cent of its private creditors agree to go through with the bond swap voluntarily—the minimum number of investors that would decisively activate CACs on all its bond issuances.
Those investors have until Thursday at 3 PM EST to decide whether they will participate in the bond swap.