Investors in Greek bonds issued under foreign law rejected thenation's attempts to restructure the debt at talks last week.

In 20 out of 36 meetings, bondholders either turned down thegovernment's proposal, adjourned the talks or failed to achieve aquorum, according to a press release today from the Greek PublicDebt Management Office.

The meetings involved holders of about $26.8 billion offoreign-law notes denominated in dollars, euros, Swiss francs andyen. Investors owning $15.3 billion of securities agreed to arestructuring, leaving $11.5 billion still to be dealt with.

“The key thing with the international bonds is that holders haveto vote bond-by-bond rather than in aggregate,” said ThomasCosterg, a European economist at Standard Chartered Bank in London.“That makes it easier for investors to block the restructuring andraises the question of what Greece can do now.”

Greece is trying to re-organize the rest of its debt aftercarrying out the biggest sovereign restructuring in history lastmonth. The government is insisting there's no money to fully payholders of bonds issued under international law, after it forcedinvestors in 197 billion euros ($263 billion) of domestic-lawsecurities to accept losses of about 70 percent.

Greece's options include opening talks with holdouts to reach amutually acceptable compromise, paying up in full or refusing topay at all, according to Costerg.

“Paying up in full would raise the issue of fairness regardingthe domestic-law bondholders, while a hard default would makelitigation likely,” said Costerg. “The bottom line is that thisreminds investors that the Greek crisis and the euro-area crisisaren't over.”

Holders of a 450 million-euro floating-rate note that falls dueon May 15, the closest maturity on the international bonds,rejected the restructuring deal, according to the pressrelease.

The country has a 30-day grace period to make the payment, datacompiled by Bloomberg show. How to handle the debt maturity will bean early test for a new government that may be elected as soon asthis month to replace Prime Minister Lucas Papademos's interimadministration.

Bloomberg

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