Greece has never been a strong presence in the Euro-MTN market, but now it promises to come into its own. Since it joined the Eurozone and swapped the drachma for euro on January 1, it can finally issue in the Euromarket without currency risk. This leaves the door open for Greek issuers to attract international investors more easily. And two new issuers are due to sign very soon. But there are many restrictions that Greek issuers face before enjoying the full benefits of the Euro-MTN market. There are just four Greek issuers in the market. National Bank of Greece (NBG) is the most recent to join. Alpha Bank and EFG Eurobank (Eurobank) signed programmes in 1999 and the Hellenic Republic set up its facility in 1995. Both OTE, the Greek telecom, and Piraeus Bank are due to sign MTN programmes in the first quarter of 2000. Though Greece joining the Eurozone has hardly surprised issuers, one Greek Euro-MTN dealer is optimistic that the single currency will make things a good deal smoother. He says: "If Greek issuers are prepared to pay, they've got a good chance of expanding their investor base." And the Eurozone has done wonders for Greek spreads. Stratos Chatzigiannis, head of capital markets at NBG, says: "Being part of the Eurozone and having the euro as our currency has driven spreads down. We've already seen this in the public debt markets. Previously levels were being posted at Euribor+15 or +20. Now it's Euribor flat. And we may see further tightening." And Greek issuance needs all the help it can get. Greek issuers sold just seven trades in 1999 and this slumped to just two in 2000. Alpha Bank and Eurobank have been involved in acquisitions, which may have slowed their issuance and at the moment Greek banks are very liquid, so they don't need much funding. Part of the problem had been that the international markets have not traditionally been the cheapest source of funding for Greek issuers, compared to their domestic market. But some feel it is worth paying up for the extra size the international markets can offer. Plus the domestic market is not likely to remain quite so attractive in the long-term. A Greek-bank specialist, at Credit Suisse First Boston (CSFB), says: "Given that Greece has fully joined the Eurozone, corporates will start to sign MTN programmes. But some are enjoying better funding domestically via the syndicated loan market. So the Greek Euro-MTN market is in an embryonic stage." He adds: "Greece has a small, fragmented economy, so banks have the resources to lend domestically - and also there is no withholding tax. All these make the domestic market more attractive." Eurobank did an inaugural euro150 million ($140.24 million) FRN issue in February last year. But a member of the treasury at Eurobank says that the price they paid did not compare favourably to the Greek domestic market: "We paid a high premium for tapping investors outside Greece." But OTE found that although the domestic market offered cheaper funding, it couldn't offer the size of debt required. Panayiotis Vlasiadis, group treasurer at the Greek telecom, says: "We've been active in the syndicated loans market for the past few years, but it is a manifestation of the size we require that it cannot be satisfied in the domestic markets of Greece." He adds that the attractive levels in the domestic market will not continue: "This is a short-lived fact, because as Greece joins the Eurozone, I think domestic spreads will increase to get to the area of Euro spreads." Although the international markets offer big volumes, Greek tax law could inhibit some issuers. Bonds and MTNs sold in the international markets must be taxed at source under Greek law. This eats away at the coupon. But Waleed El-Amir, vice president, debt capital markets at Merrill Lynch, says: "They go around this, for example by setting up SPVs, so I wouldn't say there is a real impediment." Another restriction is the approval that Greek issuers must gain from their shareholders before closing a trade. This usually takes six days. But setting up a Euro-MTN shelf domiciled outside Greece is a way around this too. The official at Eurobank's treasury says: "The whole point of the MTN is its flexibility. If we had to seek shareholder approval, it would be a substantial hurdle. It would negate the flexibility of the MTN. Setting up an SPV is one way round this." Of the four Euro-MTN programmes set up by Greek issuers, only the republic's is domiciled solely in Greece. The other three are domiciled in the UK. And this week saw the proposal from the Bank for International Settlements for an amendment to the New Basel Capital Accord. As a single-A rated country, Greece is likely to be more affected by this than any other country in Europe. The regulations will be in place by 2004. A senior money market trader at one Greek bank says: "We do expect Greece to have a ratings upgrade by 2004, so the impact would be smaller and will probably affect corporates more than banks." An official from one Greek bank thinking of joining the market says that for now the MTN programme is a means of getting the issuer's name known in the market. He says: "Issuers coming to the market this year will probably issue plain vanilla to increase awareness of their organization. But I think now is a very good time to join the market."
January 19, 2001
