Greece has announced the terms of a debt exchange as the sovereign seeks to round off an impressive year in capital markets with a deal that will tie up some of the few remaining loose ends from its turbulent period during the eurozone debt crisis.
“It is a great opportunity for investors that have been holding extremely illiquid securities to get out and exchange into liquid, on-the-run, bonds," said a lead on the exchange.
Greece has recorded several notable highlights in 2021 raising some €14bn across six successful syndications, landing a five-year with a 0% coupon, pricing a 0.75% 10-year tap through Italy and bringing its longest deal tenor in 15 years - a wildly popular 1.875% 2052 note. There is little doubt the sovereign has now completed its rehabilitation story with international investors and the latest move is merely the icing on the cake.
The exchange and tender offer relates to the remaining illiquid PSI bonds, the majority of which were retired just over four years ago via a liability management exercise when €25.47bn, or 86.1%, of those outstanding were swapped for new benchmark notes.
“This is the second step in the process. For the first liability exercise they bought back a large chunk of this PSI stuff which had been created by the exchange of the old Greek bonds for new ones for the private sector," said the lead.
“Since the previous liability exercise there has been just over €4bn outstanding of these PSI bonds. In most cases they are relatively small leftovers, like €150m-€250m per maturity year, and therefore extremely illiquid.”
BNP Paribas, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan and Piraeus Bank will act as joint dealer managers.
The bonds have maturities in every single year from 2023-2042 and can be exchanged for existing euro-denominated benchmarks - a 2% April 2027 note, a 3.9% January 2033 note, a 4% January 2037 note and a 4.2% January 2042 note. A cash consideration is also available for the outstanding 2023, 2024 and 2025 PSI paper as well as for US bondholders of the 2042s.
Normalising the curve
“It is in order to give investors the chance to get out of these bonds, which have hardly any trading in them. Talking to our traders, they have been extremely illiquid, in some cases trading with 50bp bid/offer spreads. So for someone wanting to get out of this it is a really good opportunity," said the lead.
“This follows on from the attempt in 2017 to normalise the curve. They wanted to have larger bonds in terms of size and less bonds in terms of number, so they bought back these PSI bonds and exchanged them into bigger lines. Subsequently, they have concentrated on single lines and looked to bring them up to €5bn-€6bn sizes.”
The previous exchange also occurred towards year-end, late November 2017, but the timing of the latest offer is not based upon seasonality, according to the lead.
“Supply from elsewhere or how the market looks otherwise is not really a big consideration. It is more a consideration of whether you want to get out of that sort of stuff that is extremely illiquid or whether you don’t want to," he said.
“Generally, it is positive doing it late in the year as people don’t have much else to do. At the same time, if they had done it one or two months ago it would probably have offered the same dynamics to the investors.”
The invitation was extended on December 6 and has a 5pm CET December 10 deadline, though investors wanting to participate are advised to apply before then, according to the lead.
“Friday is the deadline but given that it is a process which typically goes through the custodians, anyone who wants to apply needs to take into consideration that custodians typically will have cut off deadlines in advance of the official deadline," he said.