Greece gears up for $10bn bond in May

GREECE will try to diversify its investor base and get a better price for its debt by tapping international markets for a dollar bond of up to $10bn (€7.4bn, £6.6bn) in May.

Finance minister George Papaconstantinou is expected to lead a roadshow in the US and Asia in late April to whip up interest in the issue, which follows three euro-denominated bonds this year.
Athens is understood to be keen to give eurozone buyers a rest after a sharp decline in attention in its €5bn bond placed this week. The bond performed weakly in secondary markets despite a coupon rate of six per cent.

Greece has already raised €20.4 through debt sales in 2010. It needs to raise a further €23bn in April and May to meet its refinancing costs.

According to the country’s Public Debt Management Agency, Greece tends to raise between five and 20 per cent of its borrowings from international markets every year. The impending dollar issue would be dealt through a series of private placings, City A.M. understands.

Pierre-Olivier Beffy, chief economist at Paris-based Exane, said he was “extremely surprised” to see the beleaguered economy turn to American and Chinese investors as it would involve the extra cost of hedging out currency risk.

“However, they could have more favourable conditions – a lower yield due to appetite outside the eurozone and a lower liquidity premium,” he added.

In contrast, Gary Jenkins of Evolution Securities said it made “perfect sense” for Greece to attempt to spread its investor base.

He said: “The fact of the matter is the three bonds done this year in euros have seen ever-diminishing levels of demand and the price hasn’t got a whole lot better. That’s a pretty dangerous state of affairs.”

Meanwhile, Moody’s Investors Service yesterday downgraded its rating on five Greek banks, highlighting the pressures they face given the country’s weak economic outlook.

Europe’s most overleveraged sovereign, Greece plans to cut its budget deficit from a staggering 12.7 per cent of GDP in 2009 to below three per cent in two years’ time.