Greece’s PIRAEUS BANK SA (OTCMKTS:BPIRY) is poised to sell its first unsecured bond from the country since 2009 as investors are showing willingness to lend to banks.
If successful, the issue would be marked as the weakest rated bank credit to raise senior debt.
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Five year hiatus from market financing
Greece’s second largest lender, Piraeus last visited the euro senior unsecured market back in September 2009, when it priced a 500m September 2012 issue with a 4% coupon. It was rated A2/BBB+/A- at the time.
Currently, the bank is only rated Caa1/CCC/B-.
Interestingly, the cost of insuring senior bank debt against default, as measured by the iTraxx Senior Financials index, has dropped from over 300bp in November 2011 to 85bp. Moreover, Greek 10-year bond yields – which stood at over 30% in the middle of 2012 – have rallied 160bp since the start of the year, from 8.26% to 6.66%.
According to Christopher Thompson and Kerin Hope of Financial Times, Piraeus Bank is poised to issue a €500m senior unsecured bond and a separate €1.8bn share offering as investors show increased readiness to lend to banks in the region’s recession-battered periphery.
Exuding optimism over the proposed issue, Piraeus Bank’s chief executive Anthimos Thomopoulos said: “These actions are meant to signal, Greece has turned the corner, the banking sector has turned the corner and the international financial sector is comfortable enough to lend to us and buy shares from us in size.”
However, a dispute is brewing between Greece and its international creditors on the quantity of new capital needed. The stress tests results released Thursday revealed Greece’s four biggest lenders would need €6.4 billion in fresh capital to withstand future credit losses. However, the international creditors including European Commission arrived at a higher €8 to €9 billion figure to reach the eurozone’s core tier one capital one capital adequacy ratio of 8.
In the recent past, contrasting positions have been taken by various players on Piraeus Bank’s future. During October, Banco Comercial Portugues SA indicated that it is cashing in on the sudden interest in Greek stocks, selling all of its shares in Piraeus Bank S.A.
However, David Einhorn’s Greenlight Capital Re. Ltd recently announced that despite mostly reducing its portfolio, it added long positions in two recapitalized Greek banks viz.: Piraeus Bank S.A. and Alpha Bank A.E.
Interestingly, Greek corporates have long regained bond market access. For instance, OTE attracted 1.9 billion of demand for a 700 million 7.875% five-year trade at the end of January 2013.