Japonica Partners & Co., a new buyer has announced to buy a hefty chunk of Greece government bonds. The markets were surprised on the announcement because nobody has ever heard the name of the company. According to a press release obtained by the Wall Street Journal, Japonica will buy Greek bonds through its wholly-owned subsidiary Yerusalem Hesed, Ltd.
9.9% Of Greece Government Bonds
Japonica Partners has launched a tender offer for 2.9 billion euros ($3.8 billion) in face value of bonds Greece issued in 2012. That represents about 9.9 percent of the total Greece government bonds of 29.6 billion euros. So, why is there so much mystery and confusion? The biggest reason is that people who have been active in this market have never heard of this company.
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According to its Website, Japonica Partners is an “entrepreneurial investment firm that makes concentrated investments in underperforming global special situations.” The company was founded in 1988. It is still unclear whether the company has so much resources available.
According to the press release, Japonica Partners believes that Greece government bonds market has been highly volatile, illiquid and don’t reflect their intrinsic value. A trader told the Wall Street Journal that Japonica is a new player and markets are struggling to interpret its actions.
Japonica has set the minimum price at 45 percent of the face value. That’s about 26.5 percent premium to the price in December 2012 Greece government bonds repurchase, but lower than the most common market rate which has been between 48 percent and 62 percent of the face value. The secondary bond market has given a lukewarm response to the announcement, as prices of Greece government bonds remains almost unchanged.
Traders Doubt Japonica’s Strategy
According to the company’s statement, the buyback invitation isn’t authorized by the Greek government and Japonica Partners doesn’t have any links with the government. Traders believe 45 percent is the base rate, so it may rise. Japonica said further detailed will be released on June 5.
Analysts doubt over Japonica’s strategy because that’s not the way investors usually build up a position in government bonds. The firm has publicly announced to buy a major chunk of Greece government bonds, which may spark a rally in the existing Greek debt. Investors in Greece as well as other markets like Portugal have built their positions slowly without advertising their moves.
American hedge fund giants including Dan Loeb of Third Point and Seth Klarman of Baupost Group have successfully made profitable bets on Greece government bonds. Seth Klarman exited the position last year, but Dan Loeb maintains his stake. Last December, Dan Loeb announced to have gained $500 million from Greek debt.