State to redeem bank bond

The government yesterday said it would redeem a bond issued in 1999 that converts into National Bank equity while hinting that the exercise would facilitate moves to strengthen the bank. The bond, equivalent to a 6.4 percent stake in the bank and issued by Luxembourg special purpose vehicle Hellenic Finance, raised 775 million euros for the government. Greece acquired a penchant for securitizations in the runup to membership of the European Monetary Fund as the off-balance sheet transactions allowed it to raise funds to reduce public debt without burdening the budget. Securitization operations brought in some 2.1 billion euros for the state coffers in 2000, increasing to 2.4 billion euros the next year. A number of EU countries’ also resorted to the practice in a bid to show better budget figures than were the case, prompting a crackdown by EU statistics agency Eurostat last year. It ruled that securitizations must be treated as government borrowing and that operations undertaken in the past should be reclassified. The rule threw Greece’s budget and debt estimates off course in 2001 and 2002. The government’s decision to redeem the bond resolves an issue that had been troubling both the bank and investors, said Manos Giakoumis, banking analyst at P&K Securities. «It was only logical that the government would not renew the bond as the strike price at above 80 euros was too high,» he said. Giakoumis was doubtful as to whether the redemption would pave the way for the State to sell its estimated 21 percent stake in the bank to a strategic investor. «The present bank management has clearly indicated it is against this,» he said.

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