New bonds, old issues

Moves are afoot to boost the corporate bond market by allowing companies to securitize their property assets. This is a risky venture at a time when real estate prices are inflated, companies are deeply in debt to banks following the collapse of the stock exchange bubble, credibility in liquid assets has been shaken and international markets are weak. Companies will be able to securitize their property, according to a Finance Ministry bill, to be tabled in Parliament next month, which was largely drawn up by the Hellenic Banks’ Association. In combination with the effort to create new sources of revenue, this offers businesses the opportunity to separate their property from other assets, creating special subsidiaries that will be able to issue corporate property bonds offering returns of 6-7 percent as opposed to the rate of 1.5 percent on deposits. Bankers and businessmen have treated this new financial instrument with great wariness, as it is difficult to make a safe estimate of the danger-yield ratio. This is because there are no credible organizations in Greece to evaluate the dangers, nor is it likely that Moody’s would undertake such a task. The supervisory framework is incomplete, with memories still fresh of the losses suffered on the Sophocleous Street bourse. Some cynics also believe that this enhanced corporate bond market could be seen as a way of spreading through society the problem that many local companies are facing – diluting the burdens of the previous bubble through the creation of a new, bigger one. In other words, they note the danger raised by the securitization of corporate properties becoming a mechanism to paper over the weaknesses that many businesses are showing against the challenges of the new competitive environment. While retaining their skepticism, many market analysts believe that it is important for the corporate bond market to take off and become a major source of long-term financing for medium- and small-sized Greek firms.

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