(Reuters) – Some hedge funds are refusing to join Greece’s bond swap, threatening legal action if the government does not come up with a better offer and complicating efforts to restructure the country’s debt.
Greece’s private creditors have until Thursday night to decide whether to take part in a bond swap, aimed at avoiding a disorderly default that would drag other countries further into the euro zone crisis. But several hedge funds are expected to hold out, having bought up small amounts of foreign-governed Greek bonds, estimated to be about 10 percent of the 200 billion euros being restructured.
Hedge funds alone are unlikely to derail the swap but if their strategy works and they agree a better deal it would infuriate other creditors and use up Greek resources. If not, it could drag the Greek government into a lengthy and expensive legal battle just as it needs to focus on bringing back economic growth.
“I’m aware of several investors actively considering all of their options, including litigation,” said Steven Friel of Brown Rudnick, among the law firms talking to investors about their legal strategies in Greece.
The hedge funds favor the bonds governed by more investor-friendly foreign jurisdictions which limit a country’s ability to impose losses. The Greek legal system is seen as likely to be more sympathetic to the government.