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U.S. investor says is one of largest holders of Greek debt
October 3, 2013 / 5:59 PM / 4 years ago

U.S. investor says is one of largest holders of Greek debt

LONDON (Reuters) - Investment firm Japonica Partners, which made a surprise offer for up to 4 billion euros of Greek government bonds in June, said on Thursday it was one of the largest owners of the bonds.

U.S.-based Japonica, not previously known for trading government bonds, launched a tender offer to buy up to 2.9 billion euros in face value of Greek bonds - about 10 percent of Athens’ outstanding debt - which it raised to 4 billion euros ($5.45 billion) in July.

The firm also said the bonds were “massively undervalued” and were worthy of an investment grade credit rating. Greek bonds are currently rated as “junk” by the major credit rating agencies.

On a conference call, founder Paul Kazarian answered questions read out by Finance Director Christopher Magarian. Kazarian said Japonica was one of the larger, if not the largest holder of Greek government bonds, after excluding Greek public pension funds’ roughly 6 billion euro holdings.

But Japonica did not give any more details on the outcome of its offer process. And Magarian declined to give more information.

First launched in June, the Rhode Island-based firm extended its auction three times, suggesting the offer might have been too low to attract sellers.

Greek government bonds have risen in value since late June, supported by the country’s international lenders approving more bailout money and tentative signs its deep recession was easing.

The 15-year Greek government bond is currently trading at around 50 cents on the euro. This is much higher than the 40 cents minimum purchase price offered by Japonica.

Kazarian said Greek bonds, which Japonica had bought for as little as 11.4 percent of par value, were currently massively undervalued because of “pervasive systemic misperceptions” about Greece and obsolete accounting rules that overstate its debt-to-GDP and fiscal deficit.

The country’s debt is worthy of single A+ credit rating, he said. Credit rating agency Moody’s considers Greece’s debt far more risky and gives it a “junk” rating of C.

“What many of the best and the brightest think they know about Greece, in an investment context they are almost certainly wrong,” he said on the call. He predicted that the bonds’ price would exceed 85 percent of par value next year, far higher than where they trade today.

Founded in 1988, Japonica is best known as an activist investor in the early 1990s, but has since kept a low profile.

($1 = 0.7340 euros)

Reporting by Tommy Wilkes. Editing by Jane Merriman

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