Greece Prepares for First Long-term Bond since Bailout

After years of painful austerity and recession Greece is preparing its return to the international markets, with the issue of the first sovereign bond since the country’s financial rescue in 2010 planned for 10 April.

Having been close to exiting the eurozone only two years ago, Greece is pressing ahead with the sale of a five-year, euro-denominated bond. According to reports, the issue should raise around €2bn to €2.5bn. Bank of America Merrill Lynch, Deutsche Bank, HSBC, Goldman Sachs, Morgan Stanley and JPMorgan have been mandated to manage the issue.

The country was able to stave off bankruptcy four years ago thanks to a €218bn bailout from the European Union (EU) and International Monetary Fund (IMF) bailout money and a further €15bn of treasury bills.

According to reports, Athens currently has no pressing funding needs but is keen to ‘test the waters’ for more and bigger bond sales in the future, as part of its strategy to cover all its funding needs from the market by 2016.

Greece’s debt is currently around €320bn or 175% of gross domestic product (GDP). It is rated nine notches below investment grade at Caa3 by the agencies Moody’s and Standard & Poor’s, while Fitch ranks the country six notches below investment grade at B-.

Financial Times
reports that ahead of the sale, bankers suggested that a good result for the country would be a yield below 5.25 per cent.

The last time the Greek government issued a five-year bond on the international market, in January 2010, it paid 6.1%. A senior banker said it would be an important victory for the country if borrowing costs came below this pre-crisis level.

However, the
added that costs are still expected to be significantly higher than the 2.65% and 1.75% on Portuguese and Spanish five-year bonds respectively.


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