Greece raises 4.4 billion euros in short-term debt

Greece sells 4.4 billion euros-worth of short term debt as it awaits bailout payment

Associated Press
Greece raises 4.4 billion euros in short-term debt
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Pedestrians walks outside the headquarters of Bank of Greece, in central Athens, on Monday, Dec. 10, 2012. In an attempt to generate stronger participation in its key government bond buyback program, Greece on Monday extended the deadline for banks, funds and investors who own its debt to declare whether they will sell their holdings back at a heavy discount. (AP Photo/Petros Giannakouris)

ATHENS, Greece (AP) -- Greece raised €4.4 billion ($5.7 billion) Tuesday in two short-term debt auctions, needed to plug gaps as the country awaits a long-delayed rescue loan payment.

The successful sale results were announced shortly before the deadline expired for banks, hedge funds and other private investors to decide whether they will sell their Greek government bonds back to Greece at a steep discount on their face value.

If successful, the deal will allow smooth disbursement on Thursday of a long-delayed international bailout payment, earmarked to boost the country's battered banks and pay some of the government's mounting bills to state suppliers.

Greece's debt management agency said it raised €2.76 billion ($3.57 billion) in one-month Treasury bills — an unusually short-term issue which Greece has resorted to twice in as many months. The country also raised €1.62 billion ($2.09 billion) in six-month T-bills.

In both cases, the yields were not significantly changed from the previous auctions of the same maturity.

Debt-crippled Greece has depended on international rescue loans for the past two and a half years, after it admitted its budget deficit was more than three times the initial forecast and lost access global bond markets. In exchange for the funds from its European partners and the International Monetary Fund, Greeks were hit with years of deeply resented deficit-taming measures that saw incomes slashed and taxes constantly raised.

But the country maintains a market presence with regular short-term sales — mostly covered by liquidity-starved domestic banks that need the T-bills to use as collateral for their own borrowing needs.

At noon GMT on Tuesday, the deadline expired for private investors to participate in a bond buyback hoped to shave some €20 billion off Greece's €340 billion national debt load.

Athens can use up to €10 billion in European funds to rebuy about half its privately-held debt at a third of its nominal value. The proposal should be attractive to many investors, as the average price was higher than the market value of its bonds when the offer was announced, and some daring bondholders who bought during the summer could see their initial outlay triple.

About half the bonds are expected to come from Greek banks, which need the buyback to succeed as it will unlock their bailout funds — most of the €34 billion due on Thursday. Domestic lenders have already suffered horrendous losses from their participation in a Greek debt writedown in March.

The initial deadline for submission of interest has been extended from last week, to encourage the biggest possible participation.

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