Greece Sets Out Plan to Help Banks Shed $83 Billion of Toxic Debt
- ‘Hercules’ plan to clean up balance sheets involves six steps
- Plan’s structure detailed in EU Commission memo authorizing it
Photographer: Yorgos Karahalis/Bloomberg
The Greek government has set out its blueprint for helping the country’s banks reduce a 75 billion euro ($83 billion) pile of toxic debt left over from the last recession.
The plan aims to speed up sales of non-performing loans by Greek lenders, repackaging them into securities with the state guaranteeing the safest portions. It’s based on a model used in Italy but unlike that program, the safest tranches of Greece’s NPLs will have a BB- rating -- three steps into junk territory.
Those senior notes will be repaid first in a “waterfall” structure, according to an internal European Commission memo authorizing the program seen by Bloomberg.
Greece’s economic recovery is being hindered by the amount of bad loans held by banks, a legacy of the country’s debt crisis that forced it to seek multiple international bailouts.