India move aside. Frigoglass SA sold its 250 million euro debut bond deal tight on Monday, amid growing confidence from investors about Greece. This is part of a growing trend of Greek Junk Bonds attracting foreign investors.
Greek Junk Bonds and Yields
Frigoglass is the Greek maker of drinks fridges with large operations in Africa. Its five year senior high yield notes traded up nearly two points on Tuesday.
Frigoglass’ 250 million euro ($324.3 million) bond is the second debt sale from a Greek company in as many weeks, as the country’s corporate bond market emerges from a deep freeze.
The Greek commercial refrigeration and glass bottle producer’s bond carries a coupon of 8.25 percent. That is similar to the 8 percent coupon unrated Greek oil refiner Hellenic Petroleum SA paid to borrow 500 million euros for four years at the end of last month.
Frigoglass CEO Torsten Tuerling, feels with less than 2 percent of Frigoglass’ sales generated in Greece, its global operations seem to have appealed to investors. Besides, he indicated the proceeds of the debt sale would be used to refinance existing debt, a substantial portion of which is comprised of short-term bank loans. He exuded confidence that the company might come to the bond market again to finance its funding needs in the future.
According to data provider Dealogic, just three benchmark-size bonds have been sold by Greek companies since the country requested an international bailout in 2010 and plunged the euro zone into crisis. However there have also been a handful of smaller deals too.
Greek Junk Bonds now attractive to investors
Until recently, concerns about Greece exiting euro zone and sky-high borrowing costs weighed heavily on prospective investors mind and thwarted new issuance. However Greek companies are now taking advantage of the record-low interest rates, and investor’s recent risk appetite towards riskier bets for enhanced returns.
According to Markit Index, on average, high-grade bonds issued by companies in euros are yielding just 2.12 percent, while junk bonds in Europe are providing an average 5.68 percent return.
Stymied by a strict austerity program and record-high unemployment, the Greek economic backdrop might remain bleak. However there are signs the country is taking steps to win over investors again, such as the sale of state-gambling company OPAP SA as part of the government’s long-delayed privatization program.
Recently we reported that with an eye on higher returns, some of the big global hedge funds are attracted to investing in Greece’s banking sector.
Greek Junk Bonds further reading Morgan Stanley: Buy Greek Government Bonds