Greece’s return from its bond market exile lures global investors

Pedestrians walk past Greece’s central bank in Athens. Privatisation is a major part of the country’s plan to reduce its €319bn debt mountain to 112% of gross domestic product from 175% now within eight years.

Reuters/Athens

Greece’s return from bond market exile and signs of economic revival have attracted international investors to its privatisation drive, providing more options for raising cash to cut debts, the chief of its asset sales agency said.

“Interest is reviving and widening,” Ioannis Emiris, chief executive of the Hellenic Republic Asset Development Fund (HRADF), told Reuters in an interview.

Pension and infrastructure funds, which previously shunned Athens, are now warming to Greek assets. A new tender to sell the country’s biggest port has attracted the most diverse set of investors yet seen in any deal since the crisis began.

Privatisation is a major part of the country’s plan to reduce its €319bn debt mountain to 112% of gross domestic product within eight years, from 175% now.

But asset sales have lagged original targets set in the country’s European Union/International Monetary Fund 237bn euro bailout after the financial crisis. Athens managed to attract only one valid, binding bid for any of the major privatisation deals it completed at the height of its debt crisis in 2012-2013, when its eurozone membership seemed to hang in the balance, scaring off investors.

But since Greece returned to bond markets last month for the first time in four years, investors are coming back. The Greek economy is expected to expand by 0.6% in 2014, its first growth after a six-year recession that has wiped out almost a quarter of GDP.

“We had visited such (long-term) investors before but their response is much more positive now,” said Emiris, who manages one of the world’s biggest privatisation plans aiming to raise 22.3bn euros ($31bn) by 2020.

The sale of Piraeus Port, Greece’s biggest, is a case in point. Six suitors, including China’s Cosco and Ports America Holding, the largest port operator in the US, expressed interest in buying the company last week.

This was the first time in Greece’s four-year bailout that a sale has attracted the interest of leading companies from across the world, highlighting the interest Athens is generating.

The trigger has been Greece’s successful return to the financial markets. The Greek government, banks and companies have raised about 11bn euros between them through a string of oversubscribed bond sales and share capital increases in just six weeks.

This improves liquidity and makes it easier for investors to raise funds, said Emiris, who ran investment banking at Greek lender Alpha before taking his current job in 2012. “It’s a very positive catalyst.”

Long-term investors including Canada’s public-sector pension fund PSP are interested in buying or increasing stakes in other Greek assets, such as the country’s second-biggest port at Thessaloniki and the Athens Airport, he said.

The agency is also considering selling some assets on the country’s stock exchange, encouraged by rising volumes and an almost tripling in the Athens stock index over the past two years.

“Until recently, the stock market couldn’t be an option for us. But I think it is a good option now,” Emiris said. He said this option would be for just “a few, special cases”. He did not elaborate further.

The agency also plans to embark in November on a securitisation of real estate assets, which could generate revenues over and above those from the privatisation plan.

“We aim to structure a first issue at the range of 350-500mn euros ... it will be a mix of properties, including income-generating assets and greenfield real estate development projects,” Emiris said. Securitisation raises money by selling asset-backed securities to investors.

Since its 2010 bailout, Athens has signed privatisation deals worth 4.9bn euros. It raised upfront about 2.7bn euros in cash, with more than half of that amount coming from gambling sales and licenses.

The money raised so far is less than an initial target for 22bn euros in 2010-2013 set by the EU/IMF. The biggest deals have been the sale of gambling firm OPAP and a landmark, 915mn-euro property lease at the site of the former Athens airport.

But the EU/IMF have let this go as part of the reason was due to factors outside Athens’ control - mainly lack of investor interest and regulatory hurdles.

The lenders have not activated a bailout clause that would have obliged Athens to offset the privatisation shortfall by achieving bigger budget surpluses. Privatisation receipt targets were lowered to 22.3bn euros for 2010-2020 from an initial 50bn euros for 2010-2015.

One cloud on the horizon for the agency, though, could be the Ukraine crisis, where it is watching to see whether this could hurt sell-off plans.

“We are monitoring the situation closely,” Emiris said, adding that no Russian company has withdrawn its interest. “We have not seen any impact on the interest of Russian investors for the privatisation programme due to the Ukrainian crisis.”

Russian railways operator RZD is one of three firms which have expressed interest in Greek train operator Trainose and it is also interested in the Thessaloniki Port.

But RZD chief Vladimir Yakunin, who visited Greece in October, is one of several Russian officials close to President Vladimir Putin targeted by US sanctions.