Piraeus Bank SA’s planned bond issue will be the first public debt sale from a Greek lender since 2009 when the first cracks started to appear in the nation’s finances, according to UBS AG.
Greek banks need to boost capital by 6.38 billion euros (US$8.8 billion) after six years of recession left them with swelling bad loans, the central bank said on Friday. Piraeus, which has a shortfall of 425 million euros, is issuing debt before the Greek government returns to capital markets after its bailout, UBS said in a note to clients yesterday.
“Many high-yield investors have the cash but lack the supply,” said Armin Peter, head of European debt syndicate at UBS in London. “As long as it has a coupon it will work.”
Borrowing costs for banks in Europe’s most indebted nations dropped to a record this week as euro-area services growth accelerated and benchmark interest rates were held at record lows. Government bond yields from Greece to Ireland sank to the least since at least 2010 as the recovery from the sovereign-debt crisis gained momentum.
Greece’s second-largest lender is meeting debt investors next week after hiring five banks to advise on a deal. The issue will total about 500 million euros, the Greek newswire ANA reported on Friday, without saying where it got the information.
The average yield on financial corporate bonds from countries including Greece, Italy, Spain, Ireland and Portugal dropped to an all-time low of 2.27 percent this week, according to Bank of America Merrill Lynch’s Euro Periphery Financial index.
Boosted by a brightening economic outlook, the average yield on bonds from peripheral European nations fell to 2.44 percent on Wednesday, the lowest in the history of the euro area, according to Bank of America Merrill Lynch indexes. It is down from more than 9.5 percent in 2011.
Piraeus is rated Caa1 at Moody’s Investors Service and CCC at Standard & Poor’s. Shares in the bank, which is also planning to raise 1.75 billion euros in new equity, fell as much as US$0.17 to 1.82 euros and closed 3 percent lower at 1.93 euros.
High-yielding financial debt dominated issuance in Europe this week, with banks led by Banco Santander SA fueling the region’s busiest week for sales of additional Tier 1 bonds since the market opened almost a year ago. The notes are the riskiest form of bank debt because they have no fixed maturities and coupon payments can be deferred at the issuer’s discretion.