Greece Sells 2 Billion Euros of 2015 Debt to Banks, Bankers Say

Greece Sells 2 Billion Euros of 2015 Debt to Banks, Bankers Say


Dec. 16 (Bloomberg) -- Greece sold 2 billion euros ($2.9 billion) of floating-rate notes to five banks in a so-called private placement, two bankers familiar with the deal said, as the government seeks to shore up its ailing finances.

The securities, maturing in February 2015, were offered to yield 250 basis points more than the six-month euro interbank offered rate, or Euribor, they said. The participating banks were National Bank of Greece SA, Alpha Bank AE, EFG Eurobank Ergasias SA, Piraeus Bank SA and Sanpaolo IMI SpA, they said.

Greek bonds and stocks have tumbled in the past week on concern the government may struggle to meet its debt obligations as its budget deficit swells. Prime Minister George Papandreou appealed two days ago to unions and employer groups to help undertake “radical” action to combat the crisis. Finance Minister George Papaconstantinou said yesterday there are no discussions about a possible bailout for the country.

“Against a background of greater market sensitivity to government debt levels and deficits more generally, markets are likely to remain nervous over Greece’s fiscal outlook in the near term,” a team of analysts at BNP Paribas SA including London-based Luigi Speranza wrote in a note yesterday. “The available policy options are all, in their own way, difficult.”

The yield on the Greek two-year note soared 28 basis points to 3.39 percent yesterday, its highest level since March 11. The premium, or spread, investors demand to hold Greek 10-year bonds instead of German bunds rose 21 basis points to 250 basis points, the highest since April 2, based on closing prices.

‘Painful’ Choices

“In the next three months we will take those decisions which weren’t taken for decades,” Papandreou said in his speech in Athens. He said many choices will be “painful,” though he promised to protect poorer and middle-income Greeks.

Papandreou’s “unconvincing speech” prompted investors to increase bets against the country, according to Puneet Sharma, head of credit strategy at Barclays Capital in London. “Poor sentiment was driven by the failure of the Greek Prime Minister to clearly outline how his new government would reduce the fiscal deficit,” he said.

Credit-default swaps on Greece rose 25.5 basis points to 245.5 yesterday, according to CMA DataVision.

Elected in October on a platform of higher spending and wages, Papandreou is trying to shore up confidence in Greece. The nation’s credit was downgraded by Fitch Ratings last week.

Government measures will help calm financial markets as they are introduced over the coming months, Finance Minister Papaconstantinou said.

“The implementation of these measures over the next few months will be what convinces the markets that there is a very serious effort to reduce the deficit,” Papaconstantinou told reporters in Berlin yesterday before holding talks with German Finance Minister Wolfgang Schaeuble.

Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

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