Se­nior bank bonds fall on bail-in com­ments

Kathimerini English - - Front Page -

Se­nior bonds of Greek banks tum­bled yesterday af­ter euro-area fi­nance min­is­ters pro­tected de­pos­i­tors from any losses in the na­tion’s 86-bil­lion-euro bailout. While Greece’s third bailout will spare de­pos­i­tors in any restruc­tur­ing of the na­tion’s fi­nan­cial sys­tem, se­nior bank bond­hold­ers may not be so lucky, ac­cord­ing to com­ments from Eurogroup Pres­i­dent and Dutch Fi­nance Min­is­ter Jeroen Di­js­sel­bloem. The bond­hold­ers will be in line for losses if Greek lenders tap into any of the fi­nan­cial sta­bil­ity funds set aside in the new bailout. “Bond­hold­ers were overly op­ti­mistic be­cause bail-in of se­nior bonds was not ex­plic­itly men­tioned be­fore,” said Robert Mon­tague, a se­nior an­a­lyst at ECM As­set Man­age­ment in Lon­don. “To­day they were brought back down to earth with a bump.” Un­der the bailout terms, as much as 25 bil­lion eu­ros will be made avail­able in a fund to re­cap­i­tal­ize the Greek banks, in­clud­ing 10 bil­lion eu­ros as a first in­stall­ment. Greek stocks rose and gov­ern­ment bond yields dropped on the deal, though se­nior un­se­cured bank bonds fell. Eurobank Er­gasias SA’s se­nior un­se­cured 4.25 per­cent June 2018 bonds dropped 19 cents to 35 cents on the euro at 1.35 p.m. in Lon­don. Pi­raeus Bank SA’s se­nior un­se­cured 5 per­cent March 2017 bonds plunged 15 cents to 37 cents, while Al­pha Bank SA’s se­nior un­se­cured 3.375 per­cent notes due June 2017 dropped 13 cents to 55 cents, ac­cord­ing to data com­piled by Bloomberg. “The bail-in in­stru­ment will ap­ply for se­nior bond­hold­ers, whereas the bail-in of de­pos­i­tors is ex­plic­itly ex­cluded,” Di­js­sel­bloem said at a press con­fer­ence in Brus­sels on Fri­day. Greece’s euro-area cred­i­tors made adop­tion of the Euro­pean Union’s Bank Res­o­lu­tion and Re­cov­ery Di­rec­tive, or BRRD, a pre­con­di­tion of the bailout. The di­rec­tive, which makes it eas­ier to im­pose losses on se­nior cred­i­tors, should rank se­nior un­se­cured bond­hold­ers and de­pos­i­tors equally, said

Ger­many’s Bun­des­bank sounded up­beat on Greece yesterday, ar­gu­ing the econ­omy would grad­u­ally im­prove, ben­e­fit­ing from the bailout, tourism and in­vest­ments from Euro­pean struc­tural funds. Nor­mal­ized bank oper­a­tions will also help the Greek econ­omy while the pre­vi­ous wage and fis­cal ad­just­ments should also make an im­pact.

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