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A green bond will be the cherry on Greece's comeback cake


The issuance of green or sustainable bonds would cap off a remarkable comeback to the capital markets for Greece and further cement the sovereign’s status as a re-established frequent borrower.

Just a decade ago, at the peak of the eurozone sovereign debt crisis, Greece had no access to the capital markets. The troika of the EU, the ECB and the IMF bailed it out, creating the European Financial Stability Facility in the process as the country threatened to crash out of the euro and, indeed, the bloc.

The concept of Grexit is older than Brexit, only back then many worried that it threatened to pull the whole European project apart.

Greece made its return to the capital markets in April 2014 with a €3bn five year transaction. The sovereign spent the next couple of years issuing bonds in the short end of the curve before achieving its first big milestone with a 10 year deal in March 2019 — a staple maturity for European sovereign borrowers.

In 2020, Greece extended its curve out to 15 years before pushing even further with a 30 year bond earlier this year.

It has passed other milestones too. Since January 2020, Greece has priced its syndicated deals against mid-swaps rather than its previous convention of marketing on a yield basis; like a regular SSA borrower in other words, rather than, say, and EM credit. The allocation of its deals to fast money accounts has fallen. Its credit ratings have been upgraded several times as it closes in on investment grade status.

But perhaps most importantly, Greece has developed a regular presence in the bond markets, proving that it has access like any other European sovereign borrower. Last year, Greece raised €12bn with five syndicated deals and the sovereign has almost matched last year’s issuance this year already with €11.5bn raised through four syndicated deals, according to Dealogic.

Issuing green or sustainable bonds would cap off a remarkable comeback story in the capital markets, showing that Greece is now able to diversify its issuance having developed a complete benchmark curve and a respectably sized funding programme. It is once again a frequent borrower.

Greece is understood to be exploring the issuance of green or sustainable bonds, with a debut deal in the format may arrive in the second half of 2022, according to sources with knowledge of the matter.

GlobalCapital understands that there are three main reasons why Greece is looking into issuing green or sustainable bonds; to expand its investor base, strengthen its brand in the capital markets and reduce its funding costs.

The second reason is perhaps the most timely. A number of devastating wildfires have hit Greece and the surrounding region in recent weeks as a result of soaring heatwaves — a product of climate change.

By issuing green or sustainable bonds to fund dedicated projects, Greece will be showing that is contributing to the fight against climate change at a time when the country is being badly affected by it.

But in another way it will not be timely in that the European Central Bank’s Pandemic Emergency Purchase Programme is expected to end in March 2022, some way before the expected debut green or sustainable bond.

Nevertheless, with or without the ECB, Greece’s green bonds will be well absorbed given the scarcity of these products and Greece will add its name to a growing list of European sovereign green bond issuers.

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