Wednesday May 27, 2015 Search
Weather | Athens
14o C
09o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Piraeus bond sows seeds of Greek revival but capital demands loom

Piraeus Bank's comeback to the public bond market the first from a Greek bank in over four years has fueled hopes that its lenders are on the road to recovery, but capital demands are looming as the next big challenge.

The 5 percent coupon, 5.125 percent yield, six times subscribed order book and near 40bp secondary spread performance on the 500 million euro senior unsecured deal mark a watershed moment for Greek lenders that once saw their paper trading around the 20 percent mark.

Greece is the final frontier in the eurozone crisis recovery, with its banks having been resolutely locked out of the wholesale markets. Irish and Portuguese banks have made giant strides over the past year, issuing covered bonds and senior debt, as well as hybrid capital.

However, a recent health check to see whether last summer's 28 billion euro recapitalization of the four top banks had left them with enough cash to withstand rising loan losses exposed gaping capital holes that need to be filled.

National Bank, the country's largest bank by assets, has a capital need of 2.18 billion euros, while No.3 lender Eurobank's shortfall is 2.95 billion euros. Piraeus and Alpha Bank, on the other hand, have smaller capital deficits of 425 million euros and 262 million euros, respectively, according to Reuters.

"[The senior deal] is a great result for Piraeus but the real test for country's banks will be their ability to raise capital and pay back government participation capital," said Eva Olsson, research analyst for financials at Mitsubishi UFJ Securities.

"A capital increase will encourage secondary performance in this deal and prompt other banks like Alpha Bank and NBG to do follow-up transactions."

Investors should get their money back after a relatively short three years on the Piraeus senior debt offering, although they are exposed to the threat of bail-in from 2016 onwards, when the importance of banks' capital cushions is even greater.

No bank as lowly rated as Piraeus at just Caa1/CCC/B- has raised senior debt before but other Greek lenders, such as Alpha and NBG, which have similar deeply sub-investment-grade ratings, now have an important pricing benchmark.

"Piraeus has provided a great platform for any other Greek entity to borrow," said Derek Mills, head of financial institutions syndicate at Deutsche Bank.

"Investors are now a lot less concerned with ratings than they used to be. For instance, hedge funds and high-yield funds are ratings agnostic."

The deal offers further proof, if any was needed, of investors' need for yield. It also went against the typical convention of sovereigns establishing benchmarks off which domestic institutions can issue.

Lead managers BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC relied heavily on short-term leveraged investors and hedge funds, which took the greatest portion of the paper, to ensure the success of the deal.

Banks from Portugal, Ireland and Spain have all had to lean on the support of hedge funds to enable them to return to the wholesale funding markets and sell some of their riskiest bonds.

But real money investors with longer term horizons became more involved in follow-up transactions from Portugal's Banco Espirito Santo and Bank of Ireland, for instance.

And now that Greek banks have undergone an extensive health check based on BlackRock's loan loss projections, these investors may take a more positive view on follow-up transactions.

"The hunt for yield, the possibility of a capital-raise in the future and the results of the BlackRock survey encouraged investors to get involved in this deal," said Olsson.

"But what Greek banks really need is for the economy to recover so they can restore healthy lending practices." [Reuters]

ekathimerini.com , Thursday March 20, 2014 (15:48)  
Economic sentiment weakens in Cyprus in May, says survey
ECB said to leave emergency aid level for Greek banks unchanged
A guide to Greeces debt crisis and whats at stake
The G-7s problem: Can the world deal with a Greek default?
Commissioner Avramopoulos calls for EU solidarity on immigration issue [Update]
The European Commission proposed easing the impact of the Mediterranean migration crisis on Italy and Greece by moving 40,000 refugees to countries further north. The proposal looked set to ...
Ahead of G7, US warns Europe not to miscalculate over Greece [Update]
The United States urged European negotiators not to miscalculate as they try to negotiate a debt deal with Greece's cash-strapped government, because the cost of a Greek exit from the euro z...
Inside News
SOCCER
AEK Athens returns to top league after financial collapse
Greek club AEK Athens has just returned to the country's top soccer league, two years after financial collapse sent it to a lower league. One of the country's largest clubs, AEK sealed its s...
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...
Inside Sports
COMMENTARY
Romantic notions meet reality
Before the elections, there was a considerable number of people who totally disagreed with the ideas and program put forward by SYRIZA, but they expected that the leftist party would, at lea...
EDITORIAL
Solving the Gordian Knot
The leftist-led government, as well as the country, have both been seriously damaged and exposed to risk from the evident indecision and repeated contradictions dogging the ongoing negotiati...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Commissioner Avramopoulos calls for EU solidarity on immigration issue [Update]
2. Economic sentiment weakens in Cyprus in May, says survey
3. Ahead of G7, US warns Europe not to miscalculate over Greece [Update]
4. EU says fiscal targets, pensions, labor still to be agreed with Greece
5. Schaeuble says up to Greece to decide on capital controls
6. Vouliagmeni lifeguard taken into custody on child pornography charges
more news
Today
This Week
1. Some 300 mln left banks on Tuesday
2. Target of Greek scorn shapes nations fate as IMFs storm-chaser
3. Romantic notions meet reality
4. The G-7's problem: Can the world deal with a Greek default?
5. Solving the Gordian Knot
6. FYROM PM blames Greece for name impasse
Today
This Week
1. Conspiracy madness
2. National self-awareness put to the test
3. Albanian demarche raises concerns about possible territorial claims over Greece
4. Hotel contracts with a Greek default clause
5. Neither Grexit nor a dual currency will solve Greeces problems
6. Merkel said to plan address for Greece if deal reached
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2015, H KAΘHMEPINH All Rights Reserved.