Banks and European officials are discussing the possibility of using a different type of bond as a means of rolling over Greek debt in the hope that such a instrument will avoid raters classifying the move as a default, according to senior European banking officials.
Reuters reported Friday that discussions are underway on proposals to roll over debt in such a way that ratings agencies do not penalize the country. A senior banker quoted in the report said, "Only by a completely different composition of the bonds would the rating agencies see the restructuring as voluntary and not declare Greece insolvent."
According to an unnamed senior German banking source, banks were still mulling over a range of proposals but would not give the go-ahead to anything that might spook ratings agencies, which have said they would regard a rollover of Greek debt as an involuntary restructuring. They have said it would be difficult to believe that private creditors would willingly accept longer maturities or exchanges of new bonds for old.
Aside from Greece's own banks, Germany and Francehold the most exposure to Greek debt. Germany, Finland, and the Netherlands, among other countries, have seen increasing pressure to compel banks to share the losses incurred by a new bailout package, currently under discussion. Any new rescue package could go as high as 120 billion euros ($170 billion); it would also include up to 30 billion euros from the private sector.
French President Nicolas Sarkozy said that French banks and insurers were willing to take part in a voluntary rollover of Greece's debt. Germany's private debtholders have been asked by the finance ministry to provide it with data by early next week on the sum of their Greek exposure and their willingness to take part in a rollover.