Prudential counts on Greece to honor yen bonds maturing in July
Prudential Financial Inc., which owns yen- denominated Greek sovereign debt, is confident of being paid next month, even as the nation struggles to secure the funding it needs to stay in the euro.
Europe’s most-indebted nation will ultimately strike a deal with its international creditors, according to the company’s New Jersey-based fixed-income unit. While the firm cut its holdings of Greece’s euro-denominated securities due in 2019, which it bought last year when the nation regained access to international markets, it still owns yen bonds. A portion of those mature as soon as July 14.
“Their private-sector debt is a very small part of their capital structure,” Robert Tipp, the chief investment strategist at Prudential’s fixed-income business, which oversees $560 billion, said in an interview at Bloomberg’s London offices. “It shouldn’t be restructured. The official sector has already agreed to restructure their debt if they meet various conditions and so you’d think it would make all the sense to them to push and push to get the best deal they can get and then strike some kind of deal.”
Greece is negotiating with international creditors to come to an agreement over the economic reforms required to unlock more bailout funds. The nation is scheduled to repay about 300 million euros ($340 million) to the International Monetary Fund on Friday. It has already been through the biggest-ever debt restructuring in 2012.
Prudential funds hold about 12.5 percent of the yen- denominated debt maturing in about six weeks’ time, according to data compiled by Bloomberg. The securities with a 5.8 percent coupon are currently priced at 70.25 percent of face value.
“Those are big probabilities of default that are priced in at those levels,” Michael Collins, a New Jersey-based senior investment officer at Prudential, said on Wednesday. “International laws characterize yen bonds and they held up through the last set of restructurings.”
The money manager is still protecting its assets from threats of contagion. It has less peripheral-bond exposure and has built up holdings of asset-backed securities.
“We could see this was going to be a long ride this year, it made sense to cut out of the more liquid paper and wait and see how things went,” Tipp said referring to the Greek euro debt. “The less-liquid yen-denominated on the other hand didn’t necessarily seem worth the transaction cost.”
[Bloomberg]
