ECONOMY

Greek corporate bonds still without noticeable presence

There are two types of Greek corporate bonds; one is those traded on the Athens Stock Exchange (ASE), such as the two convertible issues of Attica Enterprises, a further two by Egnatia Bank and those of Edrassis and Ridenco. They are still only a few, refuting the projections of three years ago that the slide of the ASE, already well apparent then, would lead to their proliferation. They seemed to have remained immune to the fortunes of foreign-incorporated bonds; neither did they fall nor, more recently, did they rise, for the time being at least. Two important reasons contributed to this: One was the limited fluctuation due to their small volume, while the other was the fact that investors bought them more for the income (coupon) and less for capital gains. The other category of corporate bonds is those issued on international markets, for instance those of Alpha Bank, Eurobank, OTE Telecom, the Public Power Corporation and Coca-Cola HBC. These much larger issues followed the more general trend of bond markets, depending on their credit rating. For tax purposes, these bonds are usually issued through a «special vehicle firm» based in Luxembourg, London or elsewhere, and not directly by the Greek company. Alpha Bank and Eurobank, for instance, have issued three-year bonds with coupons bearing 3-month Euribor + 35 and 30 basis points respectively (Euribor is a European benchmark interbank rate). In the last two or three years, there has been considerable interest among foreign institutional investors for Greek corporate bonds. To this end, credit rating agencies Standard & Poor’s and Moody’s, whose rating is virtually a market «passport» for such paper, have made repeated contacts with Greek firms; however, these could not proceed with the pace required by potential demand for various reasons, including an accumulation of liquidity from the stock market boom, the relatively high minimum sums of issues and the fact that the economic slowdown froze investment funds and needed no new capital. How to invest Investors with income sufficiently high to enjoy private banking services have many possibilities to obtain advice and buy domestic corporate bonds. Small investors can participate through bond mutual funds. There are three categories, with respective restrictions by the Capital Market Commission; domestic funds (at least 65 percent invested in Greek bonds), foreign funds (minimum 65 percent placements in foreign bonds) and international funds (at least 65 percent placed in either Greek or foreign bonds). A further restriction applying to all three categories is that they cannot be more than 10 percent invested in shares. There are no restrictions regarding whether the bonds are government or corporate and what credit rating they enjoy. Prospective investors should be aware of the policies and levels of risk undertaken by the individual bond mutual funds they consider entering.