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Greek ‘No’ Vote Isn’t Priced In, Wilbur Ross Says

http://blogs.barrons.com/emergingmarketsdaily/2015/07/05/greece-no-vote-isnt-priced-in-wilbur-ross-says/tab/print/

July 5, 2015, 9:52 P.M. ET

By Dimitra DeFotis

Wilbur Ross, who bet big on Greek bank Eurobank Ergasias (EGFEY), thinks Greece won’t get austerity relief, but could negotiate debt forgiveness or longer maturities and better rates on its loans.

Getty ImagesGreek Prime Minister Alexis Tsipras speaks after casting his referendum vote July 5 in an Athens suburb.
With 61% of Greek referendum votes cast Sunday against the Eurogroup’s latest bailout offer, Ross said he expects market volatility, and added in a Bloomberg interview that markets have not priced in the “No” vote. Ross is well known for investing in distressed assets, and is one in a group that invested 1.3 billion euros ($1.43 billion) into Eurobank Ergasias last year, according to CNBC.

Ross may be optimistic, but he has already endured a 77% decline in Eurobank Ergasias shares over the past 12 months. Shares of Eurobank Ergasias and two other Greek banks, Alpha Bank (ALBKY) and Piraeus Bank (BPIRY), were halted last week in U.S. trading; those stocks trade over the counter. Shares of National Bank of Greece (NBG) are more liquid; that stock is down 37% this year and down 71% over the past 12 months, while the Global X FTSE Greece 20 ETF (GREK) is down 19% this year, and down 54% over the past year.

Ross said Greece has too many pensioners, not enough tax collection and other financial woes that mean it won’t get relief from creditor austerity demands. But he underscored that Greeks don’t want to leave the European Union. He pointed to the need for immediate cash to shore up banks.

“Greece cannot compete in the world if the government spends more than it takes in,” Ross said.

Here are more excerpts from Ross’ Bloomberg interview:

On Grexit: “The Greek people don’t want to leave the EU — they want to stay and get debt relief, and severely needed cash right away. The lack of liquidity is bringing the Greek economy to a halt. There is a very short time window if a deal is going to be made.

What is the investing opportunity? “Futures in western and Asian markets are down. I wouldn’t be surprised if we have a bumpy day Monday. People, like I did, thought there was a possibility of a yes vote.” Markets have not priced in a no vote, he said. “But the question now is, what will Tsipras do next? If he is reasonable, he could have a deal quickly. He promised voters a deal 48 hours after the referendum.”

Speaking late Sunday, Eurozone finance ministers’ group President Jeroen Dijsselbloem said the referendum outcome is “very regrettable for the future of Greece.” He added that a Greek economic recovery requires reforms and that creditors will wait “for the initiatives of the Greek authorities,” the Associated Press reports. Greek Prime Minister Alexis Tsipras was expected to zip off to Brussels, and said the referendum boosted his negotiating power with Eurozone creditors.