CORRECTED-UPDATE 2-Piraeus prepares to sell first Greek bank bond since 2009

Thu Mar 6, 2014 12:03pm EST

(Clarifies launch year of OTE bond issue in last paragraph)

By Helene Durand

LONDON, March 6 (IFR) - Greek lender Piraeus could sell the first senior unsecured bond from the country since 2009 next week, as the frantic scramble to buy debt tempts investors back to one of the eurozone's most troubled stories.

Piraeus is only rated Caa1/CCC/B- and would be the weakest rated bank credit to raise senior debt, if successful.

It would prove a watershed moment for the country's financial institutions, signalling they have regained access to the wholesale funding market after an absence so long that they do not have any outstanding bonds.

"Risk appetite is at an all-time high," said Daniel Shore, head of Northern European and Greek FIG DCM at HSBC.

"This, coupled with the current low spreads, means that it is a good time to go to see investors. While Greece still has a long road to travel, there are signs of light at the end of the tunnel."

The bank mandated BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC to lead manage the potential transaction and will meet investors next week.

Shore said that Greek banks were continuing with their rehabilitation, having had their capital replenished and been through stress tests, providing a backdrop to re-engage with the credit investor base.

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, while 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%.

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.

Greek banks are the latest to take advantage of investors' renewed love affair with anything from peripheral countries or with a high yield.

Italian lender Banco Popolare Societa Cooperativa, rated Ba3/BB-/BBB, raised 1.25bn of senior debt on Thursday, after attracting nearly 7bn of orders from investors, setting a new record for sub-investment grade banks looking to raise funds in the wholesale senior market.

Greek corporates have long regained bond market access. OTE, for example, attracted 1.9bn of demand for a 700m five-year trade at the end of January 2013. The Caa1/B- rated issue priced with a yield of 8%. (Reporting by Helene Durand, Editing by Alex Chambers, Philip Wright)

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