Greece has initiated legal proceedings in a United Kingdom court over a dispute involving GDP-linked bonds that were issued during its 2012 sovereign debt restructuring, commonly known as the Private Sector Involvement (PSI). The Greek government is seeking a judicial ruling to resolve disagreements with certain bondholders regarding its proposal to repurchase these bonds, which are set to mature in 2042.
Last week, Greece filed a lawsuit against Wilmington Trust, the trustee responsible for administering the bonds, asking the court to confirm the legality of its proposed early buyback and to validate the method it used to calculate the offer price. This legal move comes after several bondholders—specifically three investment funds and a bank—challenged the notification Greece issued on April 4 to exercise its call option. That notice, which allows the government to repurchase the bonds ahead of maturity, is set to expire on May 14. The objecting parties are disputing the formula used to determine the buyback price.
The bonds in question are financial instruments tied to Greece’s economic performance. They stipulate that payments to investors are triggered only if the country’s growth surpasses certain benchmarks. According to the original terms, if Greece’s GDP exceeds €267 billion and its growth rate tops 2%, the government would owe bondholders approximately €375 million in 2027. However, if the bonds are repurchased early under the terms proposed, that liability would fall to about €156 million.
The Greek government has priced the repurchase offer at roughly 25 cents on the euro, based on market data from the country's Electronic Secondary Market for Government Bonds (HDAT). By turning to the UK courts, Athens appears to be seeking legal clarity that could shield it from future litigation by dissatisfied investors, particularly as the country’s economy continues to rebound following a prolonged period of financial crisis.
The case is being handled by the international law firm Cleary Gottlieb Steen & Hamilton, which is representing Greece in the proceedings.
