Tags: GREECE | SOVEREIGN DEBT | CRISIS | BONDS | UNITED STATES | IMF | EUROPEAN UNION

Greece's Bond Sale in U.S. May Hinge on Aid Package

Wednesday, 07 Apr 2010 08:09 AM

Greece will have to show that it has a firm plan to resolve its debt crisis if it wants to attract new investors for an upcoming bond sale in the United States, top U.S. investors said.

Later in April, Greece will launch a multibillion U.S. dollar bond, the country's first in nearly two years, in its attempt to broaden its investor base as demand for its debt dwindles in Asia and Europe.

But major money managers, including BlackRock and Pimco, say that even though Greece's government debt yields are approaching the highest in a decade, more clarity on a safety net agreement between the International Monetary Fund and European Union is needed before taking part in the bond deal.

"They will have to come up with more specifics about the IMF-EU arrangement, or they will have to pay a higher price," said Scott Mather, head of global portfolio management for Pacific Investment Management Co. (Pimco) in Newport Beach, Calif., which oversees more than $1 trillion in assets.

Greece's borrowing costs climbed on Tuesday, with yields on its 10-year debt topping 7.0 percent as skepticism mounted about a European Union support measure. Investors dumped Greek bonds after Market News International reported that the debt-laden country was seeking to amend an EU-IMF safety net, though Greek officials denied they intended to renegotiate the deal.

Later Tuesday, Finance Minister George Papaconstantinou said in an interview on television station Mega: "Interest rates are very high and it's clear we cannot continue like this for a long time."

"It is possible they could go to markets close to all-time highs in yields and they may raise enough money to get over their debt maturity hump in May," Pimco's Mather said.

Faced with $13.5 billion in borrowing requirements next month for interest and maturing debt, Greece is seeking $5 billion to $10 billion from U.S. investors, the Financial Times reported on Tuesday.

Mather declined to say whether Pimco bought Greece's recent debt issues or would buy the new one.

Uncertainty about the aid package sent risk premiums on Greek debt to euro life-time highs of 409 basis points over euro zone benchmark German bunds on Tuesday.

"Despite the recent statement by the European authorities that 'a solution has been found,' nothing has been achieved mainly because of very conflicting rhetoric out of Berlin and Paris," said Michael Krautzberger, co-head of European fixed-income at BlackRock in London who would ultimately make the decision on whether the firm buys dollar-denominated Greek debt.

A decision on whether to participate in the dollar bond will depend on pricing, BlackRock's portfolio needs and whether there is more clarity on strategy, he said. BlackRock oversees more than $3.35 trillion in assets and has bought some recent Greek bond issues.

"Our final decision will also take into account the credibility of any European statements and of the communication around it," he said.

Other investors said that at the right price Greece's bonds could find buyers.

Tom Sowanick, chief investment officer of the Omnivest Group in Princeton, N.J., said he would place individual investors in Greek debt.

A roadshow for the deal is expected to begin after April 20, with pricing in late April or early May, according to Petros Christodoulou, the head of Greece's debt agency PDMA.

Commenting on reports that Greece may market its bonds to emerging market investors, Pimco's Mather said that on a stand-alone basis, the debt dynamics in Greece are much worse than in many emerging market countries.

"At these higher yield levels the debt is even more unsustainable so (the higher yields) may scare away more emerging market investors than it is attracting. We don't see investors jumping in full force."

Andrew Brenner, head of emerging markets at Guggenheim Securities, said in an email to clients: "Knowing the EM buyers, we point out that they know the difference between emerging markets and submerging markets."

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Greece will have to show that it has a firm plan to resolve its debt crisis if it wants to attract new investors for an upcoming bond sale in the United States, top U.S. investors said. Later in April, Greece will launch a multibillion U.S. dollar bond, the country's first...
GREECE,SOVEREIGN DEBT,CRISIS,BONDS,UNITED STATES,IMF,EUROPEAN UNION,EU,
646
2010-09-07
Wednesday, 07 Apr 2010 08:09 AM
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