Monday May 25, 2015 Search
Weather | Athens
14o C
09o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Country risk reduces sell-off prospects

 Despite loan disbursement, the economy is not yet able to attract big investments in privatizations
Prospective investors are expected to be less willing to make sizeable upfront payments in large-scale real estate development projects such as in the old Athens airport at Elliniko, according to investment bankers.

By Dimitris Kontogiannis

The risk of Greece being ousted from the euro may have been limited following the Eurogroup’s decision to release long-awaited loans of 49.1 billion euros by the end of the first quarter next year, but a shortfall in projected privatization revenues by 2016 should not be ruled out. Although the goal for the proceeds has been set at more realistic levels for the 2013-2016 period, a miss seems likely as revenues from real estate asset sales and development, a core part of the privatization program, look set to disappoint.

Greece has collected less than 2 billion euros from privatization proceeds since the country sought an international bailout in May 2010, missing all annual targets set since then, including this year’s. In the latest mid-term fiscal framework spanning the 2013-2016 period, the minimum cumulative amount targeted has been set at 9.5 billion euros, eyeing a total of 50 billion euros beyond 2020, of which 25 billion is estimated to come from property assets.

The amount of 9.5 billion euros is very modest, to say the least, compared with the initial 50-billion-euro goal set to be reached by 2015 and even the downward revised target of 15 billion. Nevertheless, it is still tall if one takes into account that the country raised some 10 billion euros from the sale of public assets, concessions etc in the previous decade when nobody doubted Greece’s position in the eurozone, funding was ample and cheap, and the local economy grew at a fast clip.

Of course, politics and operatives linked to the ruling parties did their best to delay or even cancel various privatization projects in the last 12 years or so by dragging their feet or showing incompetence. This is not the case any longer as the intentions of the current leadership at the Hellenic Republic Assets Development Fund (TAIPED), the body responsible for privatizations, are under doubt.

However, other risks remain as the recent privatization tender for the state lotteries has shown. A consortium led by state-controlled OPAP submitted an improved financial offer of 190 million euros to win the tender for the operation of the lotteries in 12 years. The offer turned out to be much higher than the initial one, prompting US-Italian concern Lottomatica, a member of the consortium, reportedly to disagree and drop out. Analysts and others think the consortium would not have been able to improve its bid so much were it not for local banks providing the extra loans at a time when many healthy private companies are cash starved.

Of course, channeling money to the state via loans provided to state-controled entities, like OPAP, by local banks for the purpose of privatization is not anything new or unusual. Banks may be able to back these decisions on financial grounds, but a number of analysts are not convinced. The latter argue that such a practice undermines the private sector at a time when credit is scarce and highlight potential risks to the success of the privatization program if it is so heavilly dependent on local banks to provide the necessary credit.

The availability and cost of funding appears to be a big issue for all kinds of privatizations and especially real estate assets. Although potential investors may be willing to use equity to pay for the purchase of land, it is almost certain they will resort to loans to finance development. With many foreign banks nurturing huge losses from their Greek holdings, it is unlikely their credit committees will give the green light to finance such projects in Greece.

Local credit institutions may be more willing and able to provide funding after their recapitalization, but some bankers caution against exuberant expectations. They cite the tighter regulatory framework of Basel III, the tough macroeconomic environment and the drive to repay state capital and reduce their exposure to the eurosystem.

Of course, no investor can ignore the tail risk of a Greek exit, even though it has been reduced considerably after the Eurogroup’s decision to disburse the much-anticipated bailout funds to Greece. In this context, few investors would be delighted to have the Greek state as a tenant in a sale-and-lease deal, which may explain the insufficient demand for such transactions, at least so far. Even if investors feel more comfortable about this type of deal in coming years, prices should reflect the country’s risk, bringing in fewer revenues.

Moreover, prospective investors are expected to be less willing to make sizeable upfront payments in large-scale real estate development projects such as in the old Athens airport at Elliniko according to investment bankers. Instead, investors are expected to somehow tie payments to the performance of the medium- to long-term projects.

This is on top of legal and other issues pertinent to individual property assets and urban planning, requiring a lot of preparation and assessment before bringing them to the market. This limits the number of exploitable property assets, Greece can put on the block and therefore the privatization proceeds can collect.

All-in-all, the disbursement of the 49.1 billion euros by the eurozone and the reduction in the public debt, following the completion of the debt buyback, have eased concerns about a Greek euro exit. However, this may not be enough to avert missing the new, lower target for privatization proceeds in the 2013-2016 period, largely due to issues related to the state’s property assets.

ekathimerini.com , Sunday December 16, 2012 (21:11)  
Finance Ministry lines up changes to car taxation
Luxury Pentelikon Hotel in northern Athens closes down
Euro weakens on Greece as emerging stocks, Spanish bonds decline
Spanish shares fall after vote as Greek stocks drop second day
Sakellaridis hopeful of deal with lenders, dismisses talk of capital controls
Greece has the responsibility to pay its obligations but needs a deal with lenders as quickly as possible because of its cash crunch, the government spokesman said on Monday in response to q...
Asylum service short of staff after losing 30 ex-municipal policemen
The bureau in Attica responsible for processing asylum applications will not be able to operate properly over the next few days due to staff shortages, authorities said on Monday. Officials ...
Inside News
SOCCER
Berg brace gives Panathinaikos four-point lead
Panathinaikos beat Atromitos on Sunday and took advantage of the goalless draw between PAOK and Asteras Tripolis to open a four-point gap from PAOK at the top of the Super League play-off mi...
SOCCER
Reds add Cup to league trophy with 3-1 win over Xanthi
Olympiakos completed a league-and-cup double on Saturday by beating Xanthi 3-1 in the Greek Cup final at the Olympic Stadium of Athens, that was more balanced than the final score suggests. ...
Inside Sports
Greece needs a second election
Most scenarios facing Greece are bleak. The country could default, introduce capital controls, forcibly convert savers’ deposits into bank capital, quit the euro and so forth. But there is s...
COMMENTARY
No more ´quick and dirty´ fixes for Greece
International Monetary Fund Managing Director Christine Lagarde correctly said last week that the protracted negotiations between Greece and its official creditors required «a comprehensive ...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Finance Ministry lines up changes to car taxation
2. Luxury Pentelikon Hotel in northern Athens closes down
3. Sakellaridis hopeful of deal with lenders, dismisses talk of capital controls
4. Euro weakens on Greece as emerging stocks, Spanish bonds decline
5. Asylum service short of staff after losing 30 ex-municipal policemen
6. Spanish shares fall after vote as Greek stocks drop second day
more news
Today
This Week
1. No more 'quick and dirty' fixes for Greece
2. Greece calls on creditors to compromise as IMF payment nears
3. ND's Bakoyannis fears capital controls over long weekend
4. Brussels Group talks to resume Tuesday with VAT, pension topping agenda
5. Tourist dies in rockfall on beach in Crete
6. Greece needs a second election
Today
This Week
1. The Greek-German breakthrough that didn’t come
2. Conspiracy madness
3. Greece came close to not paying IMF
4. National self-awareness put to the test
5. Albanian demarche raises concerns about possible territorial claims over Greece
6. Greek endgame nears for Tsipras as bank collateral hits buffers
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2015, H KAΘHMEPINH All Rights Reserved.