Kamis, 05 April 2012

Greek banks face moment of truth , foreign law greek bond holder deadline rebooted - real deadline still 5/15....


Greek banks face moment of truth
5 Apr 2012
file photo
file photo
Greek bank shareholders are under pressure from Athens to contribute billions of euros to recapitalise the lenders so that the government can avoid taking them over.
Investors will find out by April 20 the details of the financial support package on offer from the Greek government, technocrat Prime Minister Lucas Papademos said on Thursday. Athens desperately wants to keep the banks in private hands.
The terms are likely to determine whether shareholders decide to take part. If they balk at the offer, the indebted Greek state could end up owning the banks.
In a worst-case scenario, 50 billion euros or a quarter of Greece's gross domestic product (GDP), may be required to shore up the banking system. The money is needed because loan losses and a bond swap that saved Greece from bankruptcy hit its lenders - big buyers of Greek debt - particularly hard.
The government wants at least 10 percent of the capital to come from banks' shareholders through rights issues, a senior banker close to the talks told Reuters.
"Main shareholders will need to make decisions, come up with 10 percent to keep the keys," the banker said. "The total bill could reach 50 billion euros, including recapitalisation and resolution which is more costly."
Whether investors are willing to pump in the cash depends on the terms and incentives on offer, although if they decide not to "follow their money" they risk having the value of their investment wiped out completely.
"The problem with the banking sector is that the landscape remains foggy, recapitalisation terms have not been spelled out," said fund manager Theodore Krintas at Attica Bank. "Put simply, will the system be nationalised or not?"
Greece's debt restructuring last month inflicted real losses of about 74 percent on bondholders, wiping out 22 billion of the banking system's 23.8 billion euro Core Tier 1 ratio, according to International Monetary Fund (IMF) estimates. Banks held 45-50 billion euros of bonds.
Banks will also need to set aside more cash to cover potential future losses, increasing the size of the capital hole they need to fill to reach a core capital target of 9 percent by the end of September.
The Bank of Greece has hired investment adviser BlackRock to assess banks' loan books for future losses and is expected to disclose the findings of that study later this month.
With the economy mired in a deep recession and unemployment at a record 21 percent, asset quality is deteriorating. Banks' non-performing loans are certain to rise from 14.7 percent of their books at the end of September.
"The authorities will do what they can to keep the banks operating as living entities and avoid nationalisations where possible," said analyst Alex Tsirigotis at Mediobanca Securities in London.
The state does not want to take over the banks and have to put their assets on its balance sheets, which would increase its public debt still further.
The scale of new capital banks need is many times their market value after their share prices imploded. Greek bank shares have shed more than 77 percent in the last year, pummeled by the threat of dilution and a bleak economic outlook.
The big four lenders - National, Eurobank , Alpha and Piraeus - together are worth just 2.7 billion euros, a fraction of the value at their prime when they expanded in the Balkans.
A capital backstop has been set up - the Hellenic Financial Stability Fund (HFSF) - to inject most of the financial support, which will most likely be in the form of bonds backed by its international lenders. The fund will do this by buying common shares with restricted voting rights and by buying bonds, known as CoCos, issued by the banks, which would convert into shares if capital falls below certain levels.
Banks want a 3.5 percent annual interest payment and a long maturity of at least 10 years for the CoCos. The HFSF, which is funded by the euro zone and IMF, aims to eventually re-sell the shares to private-sector investors.
The more contingent convertible debt (CoCos) is issued, the smaller the rights issue will need to be, meaning shareholders will be asked to stump up less cash.
But the devil is in the detail - at what discount will the new shares be issued and will investors and the HFSF be offered new stock at the same price?
"If the price for the fund (HFSF) is lower compared to that for investors it would discourage their (shareholder) participation in the recapitalisation," the Greek banks association said in a memorandum obtained by Reuters. (Reuters)



Bond swap deadline extended yet again
5 Apr 2012
It looks like the final stage of the PSI process will not be completed just yet, with a further extension of the bond swap deadline being announced on Thursday. (photo: Reuters)
It looks like the final stage of the PSI process will not be completed just yet, with a further extension of the bond swap deadline being announced on Thursday. (photo: Reuters)
Greece extended a deadline for a second time on Thursday for remaining bondholders to accept a debt swap, giving Athens a little more breathing space to formulate a response to investors who have refused to sign up for the landmark deal.
Athens must in any case make a decision soon, in coordination with its EU and IMF backers, because a 450 million euro bond expires on May 15, finance ministry and banking officials said.
Completion of the bulk of the swap allowed Greece to get a new EU/IMF bailout last month and has helped ease market concerns over the euro zone debt crisis, at least for now.
But how Greece deals with the remaining investors is likely to set an important precedent for other highly indebted euro zone states and "vulture funds", who buy distressed government debt in the hope of securing a bigger payout in courts.
Athens gave investors on Thursday until April 20 to join in, extending a deadline that had already been moved back once to April 4.
A majority of investors have already rejected the debt swap for the May 15 bond, a finance ministry official said. But they cannot derail the overall debt swap plan - the biggest debt restructuring in history - which has now been accepted by about 97 percent of investors.
A source familiar with the talks said that the majority of the bonds maturing in May are in the hands of activist shareholder Elliott Advisors, which is well-known for contesting previous sovereign debt restructurings in Latin America.
Greece has said it cannot afford to fully pay holdouts and that the swap deal that domestic-law bound bondholders were forced to accept last month is the best available offer.
Outside the Bank of Greece, the country's central bank, about 50 retail bondholders protested on Thursday for not being excluded from the writedown.
The government is left with three options to confront those bondholders still resisting: continue to service the bonds, default and trigger litigation, or come up with a new offer while ensuring fair treatment for those that accepted the swap.
"May 15 is the latest deadline for Greece to decide what it will do with the bondholders who don't want to participate in the PSI," a treasurer at a big Greek bank said on Thursday, referring to the debt swap
Greece completed the bulk of its bond exchange on March 12, swapping a nominal amount of 177 billion euros of domestic-law government paper for new securities, inflicting real losses of about 74 percent on private-sector bondholders.
Athens said it would settle on April 11 the exchange of 20.27 billion euros of debt, equivalent to 72 percent of the bonds issued under foreign law and state enterprise notes signed up for the swap offer.
Bondholder meetings were held on March 27-29 for holders of 36 bond issues to vote on the debt swap.
Meetings regarding seven of the bonds, representing a face value of 2.45 billion euros, were adjourned with no vote. Their April 18 deadline was also extended on Thursday, to April 20.
Two other government-guaranteed bonds, worth about 450 million euros in total and issued by Greece's state railway company under foreign law, expire in the second half of the year, a finance ministry official said. (Reuters)

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