ATHENS, Greece, Jan. 18 (UPI) -- Five hard-line hedge funds threatened to block a final effort to save Greece from default unless they get an ample bond payout, debt-restructuring sources said.
New York's York Capital Management, Marathon Asset Management and Och-Ziff Capital Management Group, Florida's GreyLock Asset Management and Europe's Vega Asset Management vowed to prevent a restructuring deal from going through if they were not guaranteed a significant profit on Greek bonds they bought at distressed prices, sources familiar with the talks told the British newspaper The Independent.
The deal must go through this month or Greece could default as early as March, economists and policymakers said.
With default pressure mounting and a European finance ministers' summit set for Monday, Greek and international officials signaled Tuesday they would yield to the bank and hedge fund demands to secure a bond deal this week, the British newspaper The Daily Telegraph reported.
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Charles Dallara, managing director of Washington's Institute of International Finance, a bank lobby that represents private-sector bond holders, was in Athens Wednesday to try to agree on a deal before the Monday summit.
An IIF spokesman Tuesday denied a small number of hedge funds would be allowed to hold the talks hostage. He said the deal will go through if enough bondholders agree on the size of the regular payment on new discounted Greek bonds the private-sector investors would get in March in exchange for their old investments.
"There will always be a few holdouts," The Independent quoted him as saying. But the talks' aim would be "to get a critical mass of bondholders to participate," he said.
The talks broke down Friday because the sides could not agree on the size of the payment, known as the "coupon."
The private bondholders together hold more than $260 billion of bonds.
The International Monetary Fund, which has contributed to the Greek bailout, pushed for an annual coupon of 2 percent, which could reduce the long-term value of the new bonds by as much as 75 percent, The Independent said.
Hard-line bondholders refuse to take losses of more than 50 percent, the Telegraph said.
Germany, the biggest single contributor to the eurozone's bailout fund, has also been pushing for a low coupon.
Bondholder sources told the newspaper there was "enough movement" from Greek, IMF, European Central Bank and European Union officials to persuade Dallara to fly from Washington Tuesday to meet with them.
Greece must make an $18.4 billion bond-redemption payment March 20 -- money it doesn't have but planned to pay using its next bailout installment payment of $166 billion.
Greece's official backers -- European governments and the IMF -- have said they will not deliver the next installment without a deal to cut Greece's $454 billion debt $128 billion by Jan. 31.
Without those bailout funds, Athens will be forced into a disorderly default, which economists say could plunge the eurozone into unprecedented financial chaos and possibly prompt Greece to leave the single currency.
