Investors offer about 30 billion euros in Greek debt buyback: source

ATHENS (Reuters) - Greece is set to purchase back about half of its debt owned by private investors, broadly succeeding in a bond buyback that is key to the country's international bailout, a Greek government official said on Saturday. Greek and foreign bondholders offered the targeted 30 billion euros ($38.8 billion) in the deal, which is central to efforts by Greece's euro zone and International Monetary Fund lenders to cut its debt to manageable levels. "The buyback went well in broad terms. The amount offered by investors was within the range expected, about 30 billion euros," the official told Reuters on condition of anonymity. He did not provide more details. No formal announcement is expected before Monday, another official told Reuters. The buyback accounts for about half of a broader, 40-billion euro EU/IMF debt relief package for Athens agreed in November. The package broadly doubles the average maturity of its rescue loans to almost 30 years and cuts its interest rates by one percentage point to a level far below 1 percent. Under its terms, Athens will spend up to 10 billion euros of borrowed money to buy back bonds with a nominal value of about 30 billion euros. This is nearly half the 63 billion euros of Greek debt held by private investors eligible for the plan. Since the bonds are to be bought far below their nominal value, the country's net debt burden would fall by about 20 billion euros. A successful buyback will ensure that the IMF, which contributes about a third of Greece's bailout loans, will stay on board of the rescue. It would also unlock the payment of 34.4 billion euros of aid later this month. Athens badly needs that money to refloat its ailing economy by replenishing the capital of its cash-strapped banks and settle arrears with government suppliers. The EU and the IMF have been withholding rescue payments to Greece for six months because it had fallen short of promises to shore up its finances, privatize and make its economy more competitive. Athens has received 148.6 billion euros in EU/IMF funds since May 2010. It stands to get almost 90 billion euros more by the end of 2014. But the rescue comes at a heavy price. Austerity measures taken in exchange for aid have plunged the country into economic depression. Unemployment hit a record 26 percent in September, the highest in the euro zone. The economy is going through its fifth consecutive year of recession and is expected to have shrunk by 24 percent when recovery begins in 2014. GREEK BANKS ON BOARD The buyback was expected to go well after Greek banks, which hold about 17 billion euros of bonds, announced shortly before a Friday deadline they would take part. Two Cypriot lenders also said they would offer their bonds. Foreign investors have offered between 15 and 16 billion euros worth of bonds, Greek newspapers reported on Saturday, citing initial estimates without saying how they got them. Athens' hopes of drawing enough investors to the scheme grew after it announced better-than-expected terms on Monday, with price ranges at a premium over market prices. The price range varied from a minimum of 30.2 to 38.1 percent and a maximum of 32.2 to 40.1 percent of the principal amount, depending on the maturities of the 20 series of outstanding bonds. Hedge funds, which bought the debt at rock-bottom prices when it was feared the country would exit the euro, are estimated to hold a large part of Greek debt and the offer was seen as good enough to make them a nice profit. "Athens put forth a reasonable if not generous offer for hedge funds to participate," Sassan Ghahramani, CEO at New York-based Macro Advisers, a hedge fund consultancy, said on Friday. "I expect there will be strong participation from hedge funds, tendering a substantial portion of their Greek bond holdings," he said. The government also enticed Greek bankers by offering to protect them from possible shareholder lawsuits stemming from the buyback. Greek bankers had been reluctant to take part, in the fear they would book losses on top of the ones they incurred earlier this year when Athens enforced a debt cut on its bondholders. But the lenders were nevertheless expected to participate because they depend on the bailout funds that Athens stands to receive if its bailout continues smoothly. ($1 = 0.7735 euros)

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Employment ducks Superstorm Sandy's punch

WASHINGTON (Reuters) - Companies kept up their slow but steady hiring pace in November, defying predictions that Superstorm Sandy would deal a big blow to the labor market. While the unemployment rate fell to a near four-year low of 7.7 percent, that was only because many Americans gave up the hunt for work, tempering the signal from the stronger-than-expected payrolls growth. A big drop in consumer confidence in December, the largest fall in more than 1-1/2 years, also offered a cautionary note on the economy's health. Non-farm employment expanded by 146,000 jobs last month after gaining 138,000 in October, the Labor Department said on Friday. The increase was well above the 93,000 expected on Wall Street. "We are moving in a trend-like modest job-growth environment," said Michael Hanson, a senior economist at Bank of Bank of America Merrill Lynch in New York. "We really need to see payroll numbers break above 200,000 for a while to think we have a more sustained recovery under way." The government said Sandy, which slammed the densely populated East Coast in late October, did not have a substantive impact on the data. Economists had thought it would, with some predicting it would cut up to 75,000 jobs off payrolls growth. Nevertheless, the storm did hit the economy hard. Sandy knocked retail sales and industrial output in October and led to a big spike in claims for jobless benefits, one of the reasons economists expected job growth to slow. A Labor Department survey of households found 369,000 workers were unable to make it to work in the aftermath of the storm and a further 1.1 million ended up working only part time. However, the department still considered them employed. The stronger-than-expected payrolls number helped to push down prices for U.S. Treasuries, but lifted the dollar against a basket of currencies. The Dow Jones industrial average and the Standard & Poor's 500 Index ended Friday's session moderately higher, but a steep drop in Apple's stock once again forced the Nasdaq Composite Index to end the day in negative territory. MODEST TREND November's job gains left them just below the monthly average of 151,000 that has prevailed since January. Economists consider that pace just enough to push the jobless rate lower over time. But they say roughly 200,000 to 250,000 jobs per month would be needed to make noticeable headway in absorbing the 22.7 million Americans who are either jobless or underemployed. The 0.2 percentage point drop in the unemployment rate, which took it to its lowest level since December 2008, was due to a decrease in the size of the labor force, a suggestion that frustrated Americans were giving up the hunt for work. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell back to near a 31-year low. Heidi Shierholz, an economist at the Economic Policy Institute in Washington, said it could take more than 10 years for the unemployment rate to drop back to its pre-recession level of around 5 percent at the current pace of job growth. Last month, the retail sector accounted for more than a third of jobs gains, which economists tied to a brisk start to the holiday shopping season. Still, private hiring slowed to 147,000 from 189,000 in October, pulled down by a sharp decline in construction employment and weak manufacturing payrolls. FISCAL CLIFF WORRIES Employment continues to be held back by fears the government may fail to prevent the $600 billion in automatic tax hikes and government spending cuts set to take hold at the start of next year. The debt crisis in Europe has also weighed. Worries about this so-called fiscal cliff hit consumer sentiment in early December. The Thomson Reuters/University of Michigan's preliminary confidence index plummeted 8.2 points to 74.5. It was the largest drop since March 2011. "That confirms my belief that the only thing the economy has to fear is Washington itself," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "There is some real underlying strength in the economy as the November jobs numbers indicate, but it could be wiped out by the games being played by our political representatives." With the labor market far from full health, Federal Reserve policymakers, who meet on Tuesday and Wednesday, look certain to keep U.S. monetary policy on its current ultra-easy course. Economists said an anticipated tightening of fiscal policy next year, even if a deal is reached to avoid completely going over the fiscal cliff, provides ample reason for the U.S. central bank to maintain its stance. The retail sector added 52,600 jobs last month after rising 50,900 in October. The pace of retail hiring over the last three months was the fastest since 1995. There were also increases in information and temporary help hiring. But transport, financial, education and health services employment slowed. Manufacturing employment fell 7,000, marking the third month it has dropped this year. Construction payrolls surprisingly tumbled 20,000, despite a surge in homebuilding, which is benefiting from the Fed's effort to hold borrowing costs down. Economists said they expect construction jobs to rise in the coming months as the housing recovery returns full swing. Average hourly earnings increased 4 cents. In the 12 months through November, average hourly earnings are up just 1.7 percent, underscoring the trouble that workers are having keeping up with inflation.

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US Air makes merger offer, AMR pilots approve labor deal

NEW YORK (Reuters) - US Airways Group Inc has made a formal merger proposal to American Airlines parent AMR Corp and its creditors that could value the combined airline at around $8.5 billion, two people familiar with the matter said on Friday. Details of the proposal emerged as American Airlines pilots voted to ratify a new union contract on Friday, ending a years-long labor dispute and stabilizing the carrier as it tries to emerge from bankruptcy. Under an all-stock merger that US Airways proposed in mid-November at a meeting with AMR's unsecured creditors committee, AMR creditors would own 70 percent of the merged company and US Airways shareholders 30 percent, the people said. US Airways and AMR are negotiating toward a potential merger agreement that the smaller rival hopes could come as soon as January, one of the people added, asking not to be named because the matter is not public. The combined AMR and US Airways could have a value similar to Delta Air Lines Inc, which has a market capitalization of around $8.5 billion, the person said. At the same time, AMR is still pursuing a plan to emerge from bankruptcy proceedings as an independent airline, which will be compared against the merits of a merger with US Airways, the people said. The companies have yet to narrow differences on a number of significant issues before any deal could be agreed, including how much of the combined carrier each side should own, the people said. AMR creditors think they should get an equity stake of closer to 80 percent in a merged entity, rather than the 70 percent proposed by US Airways, the people said. AMR and US Airways also disagree on potential cost and revenue benefits from a merger as well as labor integration challenges, they added. In a note to American Airlines workers, AMR CEO Tom Horton said the company is weighing whether a merger could "create value for our owners and a positive outcome for our people and our customers. We expect to have a conclusion on this soon." Representatives of US Airways and the creditors committee declined to comment. The Wall Street Journal reported details of US Airways' proposal earlier on Friday. NEW AMR PILOTS DEAL The new labor contract, approved by nearly three-quarters of the AMR pilots who voted, gives the Allied Pilots' Association a 13.5 percent equity stake in AMR and offers what the union sees as a path to "industry-standard" pay, union spokesman Dennis Tajer told Reuters. AMR filed for bankruptcy in November 2011, primarily due to high labor costs, and said it needed to cut those costs by $1 billion a year. It achieved concessions from its ground workers and flight attendants but remained at odds with pilots in bitter labor talks that date to 2006. AMR creditors had deemed labor peace a major priority, saying uncertainty over contracts could make it difficult for creditors and potential investors to assess the company's post-bankruptcy viability. Friday's vote could be seen as addressing that concern and providing AMR a clearer path toward exiting Chapter 11. The pilots had been working under strict labor terms imposed unilaterally by AMR as part of its bankruptcy process while negotiations dragged on. The pilots struck down a previous contract offer in August, which at the time AMR had framed as its "last, best" offer. How the company will look when it exits bankruptcy is still unclear. The pilots' union says it has lost faith in AMR management, led by Horton, and strongly supports a US Airways takeover. "This ratified agreement should not in any way be viewed as support for the American standalone plan or for this current management team," Tajer said. "This contract represents a bridge to a merger with US Airways." At least one large group of bondholders, including JPMorgan Chase & Co, Pentwater Capital Management and York Capital Management, has expressed interest in providing an equity infusion to fund AMR as a standalone entity. The group was strengthened recently when other significant stakeholders, including Marathon Asset Management, joined forces with it, according to court papers filed by the group on Thursday. The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

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Foreigners seen offering 15-16 billion euros in Greek debt buyback - papers

ATHENS (Reuters) - Foreign investors have offered between 15 and 16 billion euros ($19.4-20.7 billion) of Greek government bonds in a debt buy-back programme, according to an initial estimate given by newspapers on Saturday. The plan is central to efforts by Greece's euro zone and International Monetary Fund lenders to cut its borrowing to manageable levels and unlock aid. The preliminary estimate cited by financial dailies Naftemporiki and Imerisia would suggest the buyback plan is on track to succeed. Under the plan, Athens aims to spend 10 billion euros of borrowed money to buy back bonds with a nominal value of about 30 billion euros ($38.8 billion). Since the bonds would be bought far below their nominal value, the country's net debt burden would fall by about 20 billion euros. The papers said the final figure for offers from foreign investors may increase once Greece's debt agency completes an evaluation of them. A deadline to submit the offers expired on Friday. The newspapers did not say how they had come by the initial numbers. Greek lenders, which hold about 17 billion euros worth bonds, already announced on Friday that they would take part in the buyback.

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Goldman Sachs fined $1.5 million for trading glitch

WASHINGTON (Reuters) - Goldman Sachs Group Inc was fined $1.5 million to settle charges it failed to supervise its traders and allowing one futures dealer to hide billions in dollars from sight and causing a $118 million loss. Ex-Goldman trader Matthew Marshall Taylor in 2007 camouflaged an $8.3 billion position, manually entering fake trades, the Commodity Futures Trading Commission (CFTC) said on Friday. "Goldman failed to have policies or procedures reasonably designed to detect and prevent the manual entry of fabricated futures trades into its front office systems," the top U.S. derivatives regulator said. "As a result, on seven trading days in November and December 2007, Taylor circumvented Goldman's risk management, compliance, and supervision systems," the CFTC said. In a lawsuit in New York in November, the CFTC sought a $130,000 civil penalty against Taylor, who at the time was a vice president at the bank's Capital Structure Franchise Trading desk, and later went to work for Morgan Stanley. Goldman Sachs took a $118 million loss in unwinding the position in e-mini S&P 500 futures contracts. "Taylor's activity was flagged by our controls on December 14, with no impact to customer funds," Goldman Sachs said in an emailed statement. "Since these events, we have enhanced our controls. We're pleased to have settled this matter." Taylor had established the position on December 13, 2007. Bart Chilton, a Democrat and one the CFTC's commissioners, thought the penalty was too low. "I believe that the monetary penalty should be significantly higher in order to represent a sufficient punishment, as well as to denote a meaningful deterrent to future illegal activity," Chilton said in a statement.

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