Mystery surrounds new buyer in Greek government bond market

Mystery surrounds new buyer in Greek government bond market


By Lefteris Yallouros – Athens

Japonica Partners & Co. announced an invitation by its indirect wholly-owned subsidiary Yerusalem Hesed, Ltd. for eligible holders of certain series of bonds issued by Greece in 2012 to sell the bonds for cash.

The amount to be purchased will be up to €2.9 billion in face value which represents less than 9.9% of the total outstanding €29.6 billion of Greece government bonds. The purchase of the bonds by the acquirer would permit existing holders to monetize their Greece government bonds.

According to the announcement, the minimum price at tender has been set at 45% of face value, a 26.5% premium to their average price in the December 2012 Greece government bond buyback, but well below the prevailing market rate, which is between 48% and 62% of face value.Further details are expected to be issued later this week, according to Japonica’s statement.

Greek 10-year bond yields dropped below 9 percent last month touching their lowest level since October 2010.

Japonica believes that the market for Greece government bonds is volatile, highly illiquid, and at any time not necessarily reflective of their intrinsic value. A Japonica spokesperson said: “This tender offer reflects Japonica’s long-term perspective on Greece and the progress that the country has made to date. It is Japonica’s goal to align its investment interests with those of Greece.”

The news has caught Greece by surprise, mainly because the offer is considered too low to have any prospects of success. The question analysts ask today is “why a virtually unknown investment firm from the U.S. has chosen to give Greece’s economy a vote of confidence now”, considering that this offer marks the first time ever that a private investor tenders for European government bonds.

Furthermore, it is not common practice to advertise intentions publicly, in advance, when attempting to build up a position in government debt.

Meanwhile, a senior official from the Greek finance ministry told Reuters the ministry had had no contacts with Japonica.

So far, prices of Greek debt barely changed following Japonica’s announcement.

This one’s a real thinker.