Greek corporations rush to issue bonds amid record low yields

Greek corporations rush to issue bonds amid record low yields

The easing of Greek state bond yields to record lows has opened the way to international markets for major Greek corporations too, as they can now take the opportunity to reduce their cost of borrowing.

Kathimerini understands that Hellenic Petroleum (HELPE) has completed the procedure (with only the authorities’ approval still pending) for the issue of a five-year bond amounting to at least 300 million euros so as to refinance its existing – and more expensive – borrowing.

HELPE’s net borrowing amounted to 1.4 billion euros at the end of the first half, about 500 million euros less than a year earlier. At the end of the second quarter, the group repaid an international bond of 325 million euros, issued in 2014 with an interest rate of 5.25 percent, utilizing its cash reserves.

With the issue of a new five-year note it will be able to slash its financial costs even further. The five-year bond it issued in 2017 with a coupon of 4.875 percent currently has a yield of just 1.1 percent in the secondary market.

OTE telecom has also started the process for the issue of a seven-year paper, aiming to raise some 500 million euros. According to Bloomberg, the Greek group has appointed BNP Paribas and Goldman Sachs as bookrunners, which yesterday held the first conference call with potential investors.

Market observers argue that the OTE bond yield could come to 1-1.5 percent, while the OTE bond expiring in 2022 has a yield of just 0.1 percent. The fact that OTE is a Deutsche Telekom subsidiary is an additional factor that drives its cost of borrowing lower.

In mid-October, Terna Energy is also planning to issue a bond in order to raise 150 million euros, as robust Greek enterprises see a window of opportunity to obtain cheap money from the markets. Interest rates stand at historic lows. With $15 trillion worth of sovereign and corporate bonds trading at negative yields, investors are even monitoring markets for very low positive interest rates.

Other key factors for Greek corporate bonds include the reduction of the country risk and the abolition of the capital controls.

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