Greece’s successful, if cautious, return to the bond markets this month was the result of a secret, carefully-crafted meeting Prime Minister Antonis Samaras had in New York with investors, brokered by noted Greek-American financier Jamie Dimon, Chief Executive of JP Morgan Chase.
The financial news agency Bloomberg said the head-to-head meeting was the key for Greece to be able to successfully float a 3-billion euro five-year bond at 4.75 percent.
That was less than the 5 percent it expected but still high enough to bring a bonanza to speculators who weren’t frightened off after a previous government stiffed private investors and Diaspora bondholders with 74 percent losses.
Bloomberg said Samaras began months ago to line up investors for the April 10 debt sale, which lured big players like BlackRock and Invesco.
It said that was done after he met with the investors in Dimon’s office, citing unnamed sources, during which the Premier made his plea that Greece was safe again for them.
Greek bonds returned more than 400 percent since June 2012, the month Samaras came to power, according to Bloomberg World Bond Indexes, more than any technology stock in the Standard & Poor’s 500 Index.
Ten-year Greek yields touched the lowest level since February 2010 this month and Samaras said in an interview with Bloomberg in Athens last week that he expected rates to continue falling and that his country was in no rush to tap the markets again.
To be safe, the sale was carried out through banks, including JPMorgan, rather than at an auction, to help ensure demand. The bond received offers of 20 billion euros, seven times more than was the initial target.
Almost half the debt went to investors based in the U.K. and a third was allocated to those from the rest of Europe, according to a statement from the Athens-based Finance Ministry.
“International markets are now expressing in the most undoubted way possible their confidence in the Greek economy,” Samaras, 62, said in televised comments at the time.
Demand for Greece’s notes was led by “real money investors,” or those that use existing funds rather than borrowed cash for the investments, according to the Finance Ministry.
Asset managers purchased 49 percent of the debt and hedge funds bought 33 percent, it said. Pension and insurance funds were allocated 4 percent and banks took 14 percent.
“This trade is not without risk,” Mark Nash, a London- based money manager at Invesco, which oversees $787 billion including $177 billion of fixed-income assets, said in a telephone interview on April 17 after buying the new government notes. “It relies on European growth continuing to improve. The fundamentals in Greece are not terribly rosy, but there’s no doubt they are doing a lot better.”
The Greek Prime Minister had already met with Dimon in August, when he was in the U.S. to meet President Barack Obama, Bloomberg said.
Dimon, whose paternal grandfather migrated to the U.S. after working as a banker in Athens, kicked off proceedings at the September meeting with supportive words for Samaras and his efforts to turn Greece around, according to one of the people familiar with the events. Samaras then made his case to the money managers in attendance on why they should invest in the nation.
“It is in everyone’s best interest to help Greece recover and thrive, and we at JPMorgan are pleased to do our part,” Dimon, 58, said in an e-mailed statement two days ago. He rarely gets involved in Greek-American causes. The Greek prime minister’s office wasn’t available for comment.
Samaras stressed at the meeting that relations were good with the country’s international lenders, the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) which put up 240 billion euros ($330.7 billion) in two bailouts but insisted on harsh austerity measures in return.
Greece won the Troika’s approval this month for an 8.3 billion-euro aid payment, the first disbursement from its bailout program since December and one of the last in the rescue packages, most of which will run out this year.
The European Commission forecasts that Greece’s Gross Domestic Product will expand 0.6 percent in 2014 after six consecutive years of contraction and the EU’s statistics agency ELSTAT on April 23 certified a 1.4 billion primary surplus, excluding interest on debt, the cost of running cities and towns, social security and some military expenditures as well as state enterprises.
BETTING ON GREECE
Greylock Chief Executive Officer Hans Humes says he took part in the sales process, betting Greece’s economic recovery would continue. His hedge fund was among those that made money by buying Greek bonds in 2012 on speculation that European officials would prevent the euro-area debt crisis from spreading.
“We have been a big believer in the reforms and the fact that the economy has turned around,” Humes said in a phone interview on April 21. “Given the fact we’ve been so tied into the story, and we’re so supportive of what Greece is doing, of course we’re going to be coming in with a relatively large order.”
National Bank of Greece SA, the country’s biggest lender, is planning to sell senior bonds, a person familiar with the matter, who asked not to be identified before the deal, said last week. It will follow Piraeus Bank SA, which last month held the first public sale of debt by a Greek financial company since 2009, according to data compiled by Bloomberg.
Eurobank, Greece’s third-biggest lender by assets, will seek to sell 2.86 billion euros of shares before the end of the month to plug a capital hole identified in an asset quality review, it said last week. Piraeus Bank and Alpha Bank last month raised nearly 3 billion euros, mostly from foreign investors, to bolster capital.
Joining Invesco among the buyers of the new five-year securities were New York-based Greylock Capital Management, which oversees $850 million, and Legal & General Investment Management, with the equivalent of $758 billion.
BlackRock, the world’s largest money manager with $4 trillion in long-term assets, also invested in the notes, according to a person familiar with the matter. Brian Beades, a spokesman for the New York-based firm, declined to comment when contacted, Bloomberg said.
Greek government securities returned 30 percent this year through April 22, more than double the next-best performance among the 34 sovereign markets tracked by the Bloomberg World Bond Indexes, extending their world-beating returns into a third year. Spain’s earned 7 percent.
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