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UPDATE 3-Piraeus prepares to sell first Greek bank bond since 2009
March 6, 2014 / 5:31 PM / 3 years ago

UPDATE 3-Piraeus prepares to sell first Greek bank bond since 2009

3 Min Read

(Adds details on Greek banks capital needs)

By Helene Durand

LONDON, March 6 (IFR) - Greek lender Piraeus Bank 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. Market participants expect Piraeus to tap the shorter end of the curve.

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.

However, they still have a big capital hole to fill. The Greek central bank said on Thursday that the country's major banks would need 6.4bn of capital, although Piraeus is only a small chunk of that at 425m, versus the 2.18bn needed by National Bank and the 2.945bn needed by Eurobank

Lower and Lower

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 7.875% five-year trade at the end of January 2013. The Caa1/B- rated issue priced with a yield of 8% and an issue/reoffer price of 99.493. The bond was bid at 116.50 on Thursday, according to Tradeweb. (Reporting by Helene Durand, Editing by Alex Chambers, Philip Wright)

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