Some hedge funds have found a legal loophole they believe will force Greece to repay some of its debt in full, three sources close to the matter said on Thursday, in a move that would intensify the standoff between the country and its debtors.
Greece closed a bond swap offer to private creditors on Thursday after clearing the minimum threshold of acceptance to push the biggest sovereign debt restructuring in history.
Government officials said over 75% of eligible bonds had already been committed resulting in losses of some 74% on the value of the debt in a deal that will cut more than 100 billion euros from Greece’s crippling public debt. But because of a provision written into one particular bond, some hedge funds believe that Athens has already defaulted on that bond by asking bondholders to exchange their debt for new paper with a much lower value, according to the sources. The funds are now trying to buy up enough of the bond — issued by state-owned Hellenic Railways and guaranteed by the government — to force Greece to repay them in full, to the tune of some 400 million euros.