Greece raises 2 bln euros via bond placement with banks

Greece has raised 2 billion euros from the sale of 30-year bonds to banks, according to a statement from the Ministry of Finance. According to a statement by the Minister of Finance, Christos Staikouras, “during the last two months, the Ministry of Finance and the Public Debt Management Agency (PDMA), in the context of achieving management objectives of the public debt portfolio, proceeded with absolute transparency, to buy back and re-opening issues of existing Greek government bonds with Greek systemic banks, consisting of Basic Market Negotiators of the Greek State.

In particular, from all these transactions we achieved:

(i) the reduction of general government debt by approximately 620 million euros;
(ii) extension of the weighted average maturity, from approximately 7.5 years to approximately 29.4 years, of debt with a nominal value of 650 million euros, and
(iii) the raising of total liquidity, with a simultaneous increase in government cash of approximately 2 billion euros, through the issuance of Greek government bonds, expiring in 2050, ie 29.4 years, by taking advantage of historically low interest rates, especially in the long-term part of the curve .

At the same time, from these transactions, the participating banks recorded a significant increase in their profits and capital. The Greek Government continues to deal effectively with the effects of the pandemic, while having a firm commitment to further improving public debt sustainability ratios, maintaining a secure level of government funds and the rational and prudent management of Greece’s cash flow."

The bonds were bought through the private placement by National Bank and Piraeus Bank, as reported by Reuters. This is a reopening of 30-year bond issue, which was sold through private placement in January 2020.

Of all these transactions, as shown by the published decision, new borrowings of about 2 billion euros came from National Bank. In particular, the government received from the lender 3.577 billion euros in exchange for the 30-year bonds and repurchased other securities for a total amount of 1.48 billion euros. Piraeus bought 30-year bonds worth 3.55 billion euros and sold other securities worth 3.57 billion euros.

The settlement date was set for January 20, according to a decision published in the Government Gazette late Monday. Market experts said, according to Reuters, that the yield was close to 1.5%. According to the news agency, Greece intends to raise about 8-12 billion from the bond markets this year.

According to plans announced by PDMA, Greece’s borrowing needs this year will range from 22 to 24 billion euros, while at the end of the year the state had 31 billion euros in cash available. Regarding borrowing needs for 2021, there are two scenarios.

Thus, according to the first scenario, the borrowing needs of the state amount to 22 billion euros, provided that the state reduces the stock of treasury bills by 1.6 billion euros (from 11.8 billion euros currently). In the event that the state proceeds with the repayment of t-bills amounting to 3.8 billion euros, then it will need to borrow 24 billion euros. Loan needs for 2021 are burdened by the repayment of money owed to the International Monetary Fund amounting to 5.4 billion euros.

These loan needs will be met by issuing new bonds in the market. In the first scenario, the state plans to raise 8 billion euros from the market with medium and long-term bonds. In the second scenario, the amount of the loan program increases to 12 billion euros. It is noted that the state raised 12 billion euros last year with the issuance of new bonds.