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Re: Enterprising Investor post# 89

Monday, 11/16/2015 2:26:46 PM

Monday, November 16, 2015 2:26:46 PM

Post# of 114
Greece’s Eurobank Rises On Asset Swap, Despite Debt Downgrade (11/04/15)

By Dimitra DeFotis

The Greek bank with the smallest government stake, Eurobank Ergasias (EGFEY), rallied on Wednesday after it launched a tender offer to exchange debt for equity that could help raise billions from private investors.

The Global X FTSE Greeece 20 exchange-traded fund (GREK) fell nearly 5% and other banks tumbled in U.S. trading: National Bank of Greece (NBG) fell nearly 13%, Alpha Bank (ALBKY) fell 12% and Piraeus Bank (BPIRY) fell nearly 15%.

Standard & Poor’s Ratings Services lowered its long-term counterparty credit rating on Greece-based Eurobank Ergasias D (default) from SD (selective default). It also lowered its issue ratings on the bank’s senior unsecured debt to D from CCC- and subordinated debt ratings to D from C.

Eurobank is offering 100% of the nominal value for senior notes, 80% for subordinated debt, and 50% for outstanding preferred securities. S&P says the deal — €877.5 million in securities are subject to the offer — puts the bank in default on its financial obligations. S&P writes:


“The downgrades follow Eurobank’s launch, on Nov. 4, of a tender offer to exchange securities from holders of its Tier 1 debt, Tier 2 debt and senior debt instruments with equity. This constitutes a ‘distressed exchange’ under our criteria because it implies that investors will receive less value than the promise of the original securities. This is because the issuer offers to exchange the securities for an instrument of lower ranking in the issuer’s capital structure. Additionally, we think the offer is not purely opportunistic, according to our criteria, given the financial position of the bank.”

S&P lowered Greek bank ratings to SD in late June after Greece imposed capital controls on bank deposits; controls remain in place.

Over the weekend, European lenders announced Greek Banks need a €14.4 billion ($15.7 billion) recapitalization, including €4.4 billion for baseline stress test requirements and €10 billion for an adverse test scenario. That’s better than feared, The Wall Street Journal notes. National Bank of Greece plans a debt swap and is selling its Turkish arm, Finansbank (FINBN.Turkey), which has tangible book value of €3.4 billion. Alpha bank also plans a debt swap, while Piraeus Bank, with the greatest capital gap at €4.9 billion, will rely on the public stability fund. See the WSJ story “Why the Greek Bank Nightmare Isn’t So Scary,” subscription required.

http://blogs.barrons.com/emergingmarketsdaily/2015/11/04/greeces-eurobank-rises-on-asset-swap-despite-debt-downgrade/

[I missed this article earlier]

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