Greece Going Back To Bond Markets

After being locked out of the bond markets for almost four years during a crushing economic crisis, Greece is set to make a wary return in the next few months by issuing a small offer it hopes will attract investors who weren’t frightened away when a previous government stiffed bondholders with 74 percent losses.
Hours after Eurozone finance ministers meeting in Athens agreed to release a long-delayed 8.3 billion euro installment in three parts, Greek finance chief Yannis Stournaras said Greece would now proceed with “a small issuance of bonds, three or five-year bonds, in the first semester of 2014.” He didn’t say for how much or when it would happen.
The government is buoyed by a primary surplus, which doesn’t include payments on outstanding debt — of nearly 2.5 billion euros ($3.4 billion) for 2013. That means Greece can also seek debt relief from the 240 billion euros ($330.7 billion) it owes the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB), most of which runs out this year.
Greece has been locked out of the international bond market by high interest rates for the past four years after acknowledging in 2009 that some of its financial data had been falsified. Since 2010, the government has relied on the rescue loans and had to impose strict austerity measures to keep them coming.
Greece last issued long-term debt in April 2010 — a seven-year bond that had a 6 percent yield. Its 10-year bonds later became unaffordable, with investors asking for 30 percent interest. That rate has since fallen, however, to about 6.5 percent.
Greece will get a 6.3 billion euro disbursement in May, which it needs to help meet a 10 billion euro bond payment as most of the loans essentially have gone to pay previous loans and not to reduce debt nor help social services.
May is also when the ruling parties of Prime Minister Antonis Samaras’ New Democracy Conservatives and his coalition partner, the fast-fading PASOK Socialists, face critical elections for Greek municipalities and the European Parliament and a severe challenge from the major opposition Coalition of the Radical Left (SYRIZA).
Payouts of one billion euros each would be made in June and July, linked to the implementation of financial targets Greece has agreed to. The Parliaments of some Eurozone countries must ratify the payments before they are actually made, but the Eurozone’s decision is key to the process. The amount does not include the IMF’s portion of the installment, which is paid separately.
The approval of the release of funds comes after the completion of a months-long debt inspection by the IMF, European Central Bank and European Commission.
“This has been an arduous process but we have now a positive outcome,” said Jeroen Dijsselbloem, the Dutch finance minister who chairs the Eurozone meetings.
The government plans a return to markets by selling 2 billion euros ($2.8 billion) of bonds, three officials said, the financial news agency Bloomberg said.
Only the exact timing remains to be resolved, one Greek official said on condition of anonymity because the plans aren’t yet public. Another Greek official said this doesn’t exclude the possibility of further sales later, with the Wall Street Journal reporting that Greece hopes to raise as much as 5 billion euros on financial markets this year.
Stournaras said that market financing would complement Greece’s other efforts to line up a year of financing, a condition of unlocking money from the International Monetary Fund. Greece “fully satisfies” the 12-month funding condition, he said.
“A small issuance of bonds, three- or five-year bonds, in the first semester, somehow in the first semester of 2014, will also contribute to the financing needs of Greece,” Stournaras told reporters in Athens after a meeting of European Union finance ministers.
The austerity measures Greece has been forced to make have led to frequent and often violent demonstrations. Authorities banned all protests in much of central Athens for the Eurozone meeting and a later meeting of all European Union finance ministers and put snipers on some rooftops.
Nevertheless, some 7,500 anti-austerity demonstrators held three separate protests outside the exclusion zone, and some tried to break through a riot police cordon blocking their way to Parliament. Police dispersed them with tear gas and stun grenades, but no injuries or arrests were reported.