By Christopher Spink
LONDON, Feb 6 (IFR) - Portugal has been discreetly
sounding out advisers on options to restructure its debt.
Although the government has yet to formally appoint any firm,
IFR has learnt that ministers have been watching developments in
Greece closely with a view to replicating elements of any final
Some of those consulted are understood to have advised
Portugal to follow a similar path to Greece's private sector
involvement (PSI) plan, to persuade private sector bondholders
to take a voluntary haircut on their bonds, if the latter proves
successful over the next six weeks.
"If there is success with PSI in Greece, then it could open
the eyes of some governments," said one sovereign debt adviser
involved in such preliminary discussions. "It would show that
after all debt reduction is possible and not the end of the
world. That could create an interesting precedent."
Advocates of a Portuguese debt restructuring urge that a
decision be taken swiftly. Such procrastination has made the
Greek experience far more complicated than it needed to be.
"The lesson from Greece is that getting money from the
official sector and letting the financial sector escape, with at
least 40 billion euros in bond repayments (made by the official
sector to investors), means you have fewer restructuring
options," said Mitu Gulati, a professor at Duke University
specialising in sovereign restructuring.
Concerns have mounted that Portugal might have to revise its
78 billion euro bailout from the EU and IMF because it would be
unable to return to the market after the three-year programme
finishes in mid-2014. An 11-year 6 billion euro bond maturing
that June is currently yielding about 20 percent.
Other countries in peripheral Europe have seen
their bond yields come down since the introduction of the ECB's
three-year liquidity scheme in December. But Portugal's have
remained at elevated levels, even after Germany's Chancellor
Merkel said PSI only applied to Greece.
Over the next two years, Portugal has two other longer-term
bond issues maturing with a combined par value of 18.9 billion
euros. However, the adviser said that, as with Greece, the
country also had a revolving series of shorter-term paper to
keep rolling over.
For example, over the rest of this year 16.4 billion euros
of such paper, with maturities of less than three years, comes
"It's a misconception that Portugal is out of the market
until 2013. It has to be in the market regularly through issuing
short term and it's hurting," said the adviser.
The situation eased slightly last week with a 1.5 billion
euro auction of three and six-month paper, each yielding less
than 5 percent. However, that still represents a significant
spread over Italy, which can currently get two-year money at 3.2
Portugal has also made progress with its privatisation
programme, unlike Greece. At the end of December it agreed to
sell a 21 percent stake in Energias de Portugal to
China Three Gorges for 2.7 billion euros, putting German energy
utility E.ON's nose out of joint.
"The deal shows that Portugal can resist pressure from the
EU and Germany," said one Lisbon-based lawyer.
And last week Portugal also sold a 40 percent stake in its
power grid company REN to China State Grid and Oman
Oil for 592 million euros.
In a speech in London last week finance minister Vitor
Gaspar said that three transport-related deals were due to be
agreed in the first half of this year. He did not respond to
requests for comment on talks he may have had with advisers.
Lazard is believed to be speaking to the government.