Greece plans three new bond sales to build post-bailout buffer


Greece wants to create a cash buffer of up to 19 billion euros ($23 billion) to cover debt repayments after it exits its current bailout program and plans three new bond issues by August, government officials told Reuters on Tuesday.

The debt-burdened country, which has relied on rescue funds since 2010, is keen to return to normal market financing after its current loan program expires in August.

The buffer will help to assure markets that Athens will be able to cover its debt maturities for a year and a half after the present bailout expires without external help, one finance ministry official with knowledge of the issue said.

“This will function as a cash cushion, it will show that debt servicing needs are already covered for a significant period after the end of the bailout,” the official told Reuters.

Greece faces about 28 billion euros of maturing debt up to the end of 2019 and can cover one third of that amount with the last two loan installments it got from its third bailout.

It expects to get about 9 billion euros more from official lenders in the coming months to build up the buffer and plans to raise about another 9 billion euros from markets by issuing three new government bonds.

“We plan to issue a new bond in the weeks after the Eurogroup‘s approval of the third (bailout) review. There is no final decision on the maturity, but it will probably be a seven-year bond,” another official said, without elaborating.

The January 22 meeting of eurozone finance ministers will assess whether Greece has done enough to conclude the third review of its current 86 billion euro loan program. Once it gives the green light, Athens will receive its next loan installment of 6.7 billion euros.

“If conditions in the markets are favorable, possibly two more issues will follow until August,” the second official said.

Greek government bond yields are close to their lowest level in years. The country‘s economy started recovering last year after a seven-year recession and is expected to grow by 2.5 percent this year.

Ten-year government bond yields dropped to a 12-year low of around 3.68 percent last week.

The country returned to bond markets last year, raising hopes that it can again become financially independent. [Reuters]