February 7, 2018 / 1:52 PM / 10 months ago

Greece still waiting for dust to settle

LONDON (IFR) - Greece is waiting for the dust to settle before it comes to market with a seven-year euro benchmark.

Following a day of volatility in equity markets, Greece on Wednesday continued to monitor conditions and collect investor feedback ahead of bringing the trade.

The mandate for the deal, set to be its longest issue since returning from a three-year exile last year, was formally announced on Monday with leads Barclays, BNP Paribas, Citigroup, JP Morgan and Nomura saying it would come in the near future subject to market conditions.

“We are on standby. We want to see markets normalizing,” a Greek official who requested anonymity told Reuters.

A lead said they had been waiting on Wednesday to see whether conditions would settle, and they could start marketing on Thursday depending on what happens when US markets open.

“Market volatility has impacted whether this was a go or no-go day,” said a lead.

“We’ve been [reaffirming orders from investors] for the past two days. It’s the normal procedure, something more in line with an emerging markets-type execution than what we usually see on the SSA side.”

The lead said yield targets had not been set by official creditors, which are seen as slowly stepping away as Greece proves it can stand on its own.

A banker away from the deal said Thursday is wide open for the potential sale.

“The window looks clear as no significant economic data points will be coming out,” he said.

“The EFSF (which drew books of over €14bn for a €3bn deal) shows that the spillover effect from equities hasn’t been that severe in fixed income. SSA trades yesterday have worked out and I don’t see why that should be any different for Greece if the pricing is right.”

But Greece doesn’t need to rush to market, a second lead said.

“The Greeks are very well-funded, have liquidity on hand and there’s an expectation that the transaction would be done before exiting the program,” he said.

The Greek central government has a estimated cash buffer of €6.5bn, according to a December report by PGIM Fixed Income.

Greece wants a cash buffer of up to €19bn to cover debt repayments after it exits its current bailout program and plans three new bonds by August, Reuters reported on January 18.

A second banker away said the most important consideration to Greece would likely be to complete a successful trade rather than hurrying into it.

“You’d want and need the best possible market conditions,” he said.

“They have to be very careful - the last thing you’d want is to force the market into a disastrous trade.”

The trade is widely seen as a signal that Greece wants to independently access market funding provided by the international community, which could show to rating agencies that it is making progress in terms of managing its finances.

Greece is rated Caa2 by Moody’s, B by S&P, B- by Fitch and CCCH by DBRS, all on positive outlook.

Editing by Alex Chambers, Julian Baker

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