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Greek Bond Final Term Sheet: Upsized, Eight Times Oversubscribed, And Yielding 4.95%

Tyler Durden's picture




 

"Fear Of Missing Out" - that is the only way one can explain the irrational idiocy with which asset "managers" are scrambling to allocate other people's money into today's "historic" Greek (where unemployment just printed at 26.7%) return to the bond market, and which according to Greek PM Venizelos was eight times oversubscribed, or far more demand than for the Facebook IPO. Ironically, while we joked earlier this week, when the Greek 5Y was trading in the 6% range that the new bond would issue at 3%, we were not too far off on the final terms which were largely expected in the mid-5% range. Instead, Greece shocked everyone when it announced that the avalanche of lemmings had made it possible for Greece to issue debt at a sub-5% yield, and a 4.75% cash coupon! Here is the final term sheet.

  • Issuer: The Hellenic Republic
  • Amount: €3 billion euros ($4.15 billion, upsized from €2.5 Billion
  • Maturity: April 17, 2019
  • Tenor: 5 Years
  • Yield: 4.95%
  • Coupon: 4.75%
  • Rating: Caa3/B-/B-
  • Underwriters: BofAML, DB, GS, HSB, JPM, MS
  • Governing Law: English

Additionally, as the Greek finmin said, "Demand for the bonds was very strong. Participation of foreign institutional investors is expected to approach 90 percent." And participation of other people's money will reach 100%.

Goldman's post-mortem:

Earlier today the Hellenic Republic announced its intention to access international bond markets for the first time since early 2010. Greece’s attempt to regain market access is a result of a combination of macro drivers, which we have highlighted since mid-2012 and which remain in place:

 

1.    Greece is gradually exiting a deep recession, having shed almost 25% of its nominal GDP between late 2009 and late 2013. At the onset of the crisis, the economy featured large imbalances, which pointed to the economic pain set to follow. To mention a few: a very wide primary budget deficit (near 10% of GDP), a current account deficit amounting to almost 14% of GDP, uncompetitive levels of unit labour costs, and significant frictions in the operation of labour and product markets.

 

The structural adjustment programme for Greece, beyond its significant cost in terms of economic activity, has helped address some of these imbalances, at least in part. The country now runs a primary surplus, which currently hovers north of 1.5% of GDP and which different official sector estimates place north of 4% on a structural basis. In addition, the current account deficit has been eliminated, unit labour costs are at lower levels than before the Euro adoption relative to EMU averages, and there have been elements of reform in labour and product markets.

 

As a result, the outlook for the Greek economy is starting to reverse. Investors are expecting mildly positive growth rates and are reducing the required premia to lend the government of the country.

 

2.    After significant losses for bond investors and for governments, Greek debt has been restructured substantially. Despite the sharp rise in the ratio of debt to GDP (north of 175% of GDP), interest payments for Greek debt have been reduced so that the average cost of borrowing remains at or below pre-crisis debt servicing levels (around 4-4.5% of GDP) and the largest part of this is deferred cash payments (and hence requires no market financing to cover). By 2016, more than 80% of Greek debt will be in official hands. And the agreement between Greece and its EMU counterparts is that further debt relief may become available – possibly in the form of maturity extensions of already long-dated official loans and interest burden reductions. Therefore, it is becoming increasingly clear that the probability of default for the Greek foreign law government bonds is low and declining.

 

3.    The Greek government has regained credibility by showing willingness to adopt reforms, which, although unpopular, have helped the country’s recovery prospects. Equally, the EMU governments have shown uniform support towards that effort, largely smoothing the relationship between the country and the Euro area core. So, although Greece's debt levels are still high, the probability of a disorderly solution has declined

It wasn't all lunacy. According to Kleinwort Benson, the pricing was "irrational." From Bloomberg:

  • New 5Y GGB should have been priced 100bps higher to be at fair value given Greece’s credit risk, Fadi Zaher, head of bonds and currencies at Kleinwort Benson, says in interview.
  • Greek sale said to exceed EU3b as nation ends 4-year exile from international markets
  • Pricing of bond is “better than what the Greeks themselves had expected:” Zaher
  • Now is ideal time for Greece to issue, amid investor “euphoria” over euro area; sale shows resumption of confidence in country
  • Kleinwort Benson chose not to buy because of medium- and longer-term risks surrounding nation’s high debt levels, even though bond may perform well in near term
  • Cites example of Argentina: “They went through different phases of debt restructuring, and the problems resumed”
  • GGBs don’t look attractive in terms of risk-adjusted returns

Who cares. The bubble is growing, the music is playing, and one must dance. Rinse. Repeat.

 

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Thu, 04/10/2014 - 08:10 | 4642560 savedeposit
savedeposit's picture

Idiots

Thu, 04/10/2014 - 08:22 | 4642565 Wolferl
Wolferl's picture

It´s the same old game that led us into crisis. Sell "Greek bonds" for a high yield, those who buy them get insured by credit default options or credit default swaps, which are sold again back and forth till they land up in some pension fund. Sure profits for the 1% and the banksters, risk and losses for the stupid masses. Will we never learn?

Thu, 04/10/2014 - 08:29 | 4642619 Arius
Arius's picture

"Will we never learn?"

 

Who is the "we" if may I ask?  this is a fixed game, it always was "we" just did not know because the spigot was wideopen ... well, now, the powers to be have decided to turn it off so tp speak ...  but no room for the "we" etc.

Thu, 04/10/2014 - 08:37 | 4642648 Fuh Querada
Fuh Querada's picture

"we" is you and your pension fund "manager".

Thu, 04/10/2014 - 08:46 | 4642676 Bangin7GramRocks
Bangin7GramRocks's picture

Probably a safe bet. "They" will never let anything of substance default ever again. It's all 1's & 0's and it can all be manipulated accordingly.

Thu, 04/10/2014 - 08:55 | 4642705 Arius
Arius's picture

the concept of "we" learning from bad experiences, assumes "we" have some power ... i dont think "we" do, that includes me and my fund manager ... hard to admit but better to face it ... me thinks, but could be better living in a bubble .... hopefully "they" never break it

Thu, 04/10/2014 - 09:04 | 4642736 wallstreetapost...
wallstreetaposteriori's picture

No Shit.... Does this mean that the hellenic people will stop infecting themselves with the aides virus for the benefits euros? I have a plan.... Short the largest holder of this paper... because when risk gets repriced, they are done for.

Thu, 04/10/2014 - 09:45 | 4642830 SamAdams
SamAdams's picture

Sweet Zombie Jesus, debt beget debt beget debt beget debt...

I found the problem, "Underwriters: BofAML, DB, GS, HSB, JPM, MS."  

Thu, 04/10/2014 - 09:53 | 4642868 ilion
ilion's picture

So what have we learned from Greece and Cyprus? Nothing.

Thu, 04/10/2014 - 10:28 | 4643018 Bunga Bunga
Bunga Bunga's picture

They learned how to rig the markets. 5% interest rates two years after a 50% haircut at 180% debt - that's not real. 5% were even yielded not long ago for US -treasuries,  when debt was 70%, unemployment was 5%, economy grew and there was never ever a default or haircut.

Come on guys - that's not real. Probably a staged market with IMF/ESM money through the back door.

Thu, 04/10/2014 - 08:10 | 4642561 GetZeeGold
GetZeeGold's picture

 

 

Come on.....you know you want some!

Thu, 04/10/2014 - 08:15 | 4642576 blabam
blabam's picture

Ow why the fuck not?

Thu, 04/10/2014 - 10:00 | 4642901 Cpl Hicks
Cpl Hicks's picture

I guess I picked a bad week to stop buying bonds.

Thu, 04/10/2014 - 08:14 | 4642563 fonzannoon
fonzannoon's picture

Somewhere out there that guy Leo K or whatever his name was from my early days here just emptied a nail gun and managed to reload it and empty it on himself again.

Thu, 04/10/2014 - 08:37 | 4642650 Fuh Querada
Fuh Querada's picture

Leo Kolonevakis

Thu, 04/10/2014 - 08:11 | 4642566 buzzsaw99
buzzsaw99's picture

fidelity loves that chit

Thu, 04/10/2014 - 08:11 | 4642567 PlusTic
PlusTic's picture

26.7% "official" unemployment rate...sounds like a prudent (fiduciary) bet :0

Thu, 04/10/2014 - 08:15 | 4642577 fonzannoon
fonzannoon's picture

we need to figure out how to get in on these Chinese bankruptcy names. If they were paying 10% pre default they gotta be paying like 15% now.

Thu, 04/10/2014 - 08:17 | 4642579 tarsubil
tarsubil's picture

Things are looking up. I can feel it.

Thu, 04/10/2014 - 08:17 | 4642580 firstdivision
firstdivision's picture

I'd rather buy a Chevy Volt and not insure it.  Same risk, but at least I can still sell the car for scrap after it spontanously combusts, so my ROI is still higher than buying GGGBs

Thu, 04/10/2014 - 08:18 | 4642581 Winston Churchill
Winston Churchill's picture

Suicide bonders.

Thu, 04/10/2014 - 08:18 | 4642582 highwaytoserfdom
highwaytoserfdom's picture

$4.15 billion debt deal..... Wait a second   wasn't 5 billion spent on overthrowing Ukraine government.?  WTF?  Just what kind of Hobson's choice are we giving?   IMF hegemonic demons of destruction by usury and not opportunity.  with 68 T in unfunded programs here the Interventionist  war mongers and Corporate oligarchs  rule....       People suffer. workers suffer, farmers suffer, take a good look.

Thu, 04/10/2014 - 08:18 | 4642584 ziggy59
ziggy59's picture

OPM, Other Peoples Money, is always permitted by these fugsterbankster groups..

..hence the world is in shape its in...

Thu, 04/10/2014 - 08:19 | 4642585 Bill of Rights
Bill of Rights's picture
RUSSIAN PRESIDENT PUTIN HAS INFORMED SEVERAL EUROPEAN LEADERS ABOUT THE "CRITICAL SITUATION" AROUND UKRAINE'S GAS DEBT AND POSSIBLE IMPACT ON TRANSIT OF RUSSIAN GAS - ITAR-TASS CITES SOURCE

http://uk.reuters.com/article/2014/04/10/russian-president-putin-has-inf...

 

 

Thu, 04/10/2014 - 08:24 | 4642598 GetZeeGold
GetZeeGold's picture

 

 

Did he do that with his shirt on or off.....it's important!

Thu, 04/10/2014 - 08:20 | 4642587 new game
new game's picture

maybe they will set aside some of the proceeds for future payments.

ponzi schemes need a new and present partcipant. central banks fulfill that role.

create some moar fiat and keep er on the tracks.

who skims the first millions? 

  • Underwriters: BofAML, DB, GS, HSB, JPM, MS

the train rolls, keep the faith, bonds baby bonds.

Thu, 04/10/2014 - 08:21 | 4642589 highwaytoserfdom
highwaytoserfdom's picture

When the BTFD FED fails you mean we get 4.95%......    Is thiis math or Howard Beal?

 

Thu, 04/10/2014 - 09:23 | 4642797 Caracalla
Caracalla's picture

Should I BTFD on U.S. stocks or go grab that 4.95% yield?  Decisions, decisions.....

Thu, 04/10/2014 - 08:23 | 4642594 skistroni
skistroni's picture

Proceeds from the bond issuance will cover existing restructured bonds which were paying a paltry 1-2%, held mostly by the ECB, other European central banks, and of course the "Underwriters" (Full list above). What a great bargain!

I can't stop thinking that the Underwriters are now so desperate for yield, that they make every effort to convince a bankrupt nation that it's so good to be out in the markets again, and do all the marketing campaign to convince everyone else too that this is so. But what do I know?

Thu, 04/10/2014 - 09:06 | 4642744 edotabin
edotabin's picture

The usual feel-good horseshit. Someone is going to have to cover that and it will be the ECB sooner or later. They are buying time and hoping for growth to kick in. IF it does the situation will be mitigated somewhat.  If not (most of Europe is about to get their power shut off) then the shit will really hit the fan.

Thu, 04/10/2014 - 08:23 | 4642595 highwaytoserfdom
highwaytoserfdom's picture

AWACS  flying over Poland.....      NICE.....  

Thu, 04/10/2014 - 10:04 | 4642918 Cpl Hicks
Cpl Hicks's picture

And two more Aegis destroyers to Japan!

Thu, 04/10/2014 - 08:23 | 4642596 BlindMonkey
BlindMonkey's picture

In the whorehouse where nearly all have AIDS, the whore with crabs is the princess.

Apparently, the whore with leprosy gets a 4.75% rate.

Thu, 04/10/2014 - 08:24 | 4642599 Bernoulli
Bernoulli's picture

This is the joke of the century. There will be no EURO in a year from now. Why can't people finally understand that!?!?

Greek government throwing an additional 150 Million EUR out of the window every year for interest. This is Greek peoples money, and should be used to rebuild the country after their default, not given to the "investors" for doing nothing!! Bloody criminals!!

How much did BofAML, DB, GS, HSB, JPM, MS pocket for "underwriting" this?

I'm in a bad mood now.

 

 

Thu, 04/10/2014 - 08:28 | 4642616 put_peter
put_peter's picture

Artificial market, artificial prices. I bet the ECB was bidding hard.

Thu, 04/10/2014 - 08:29 | 4642622 highwaytoserfdom
highwaytoserfdom's picture

Wolferl   best post of year...   Credit deault swaps on the whole graph........   IMF IMF  IMF USA USA USA.


Thu, 04/10/2014 - 08:41 | 4642658 Carl Popper
Carl Popper's picture

Yeah it is too bad that subtle rendition of the quote by Prince at the end will escape the sheeple.  

 

But sheeple don't come here.  They graze elsewhere.  Gonna take a lot more than zero hedge to wake them up.

Thu, 04/10/2014 - 08:34 | 4642638 edb5s
edb5s's picture

Well it looks like Greece is fixed.  No need to worry.

 

/s

Thu, 04/10/2014 - 08:35 | 4642641 Carl Popper
Carl Popper's picture

Great.

Problem solved.

Now back to reruns of Dancing with the Stars.

That shit never gets old.

Thu, 04/10/2014 - 08:52 | 4642659 Peter Pan
Peter Pan's picture

The graph is missing the line showing the growth in debt. That is the true context within which to view today's bond market offering.

Consider this. Greek PM announces primary surplus of 1.5 billion euro. That is, the surplus before interest payment on debt.

Debt is over 320 billion euros. If interest is at an average of 5% this translates to 16 billion euros a year or over 14 billion euro deficit overall. Debt goes up by 14 billion euros or over 4%.

With idiots like these on both sides of the transaction, what could go wrong?

 

Thu, 04/10/2014 - 08:44 | 4642670 youngman
youngman's picture

Truly amazing....who would have thought.....the investers MUST have some inside information about Greece....like one of their islands is solid gold or something...because this just stinks to high heaven

Thu, 04/10/2014 - 09:37 | 4642824 Yen Cross
Yen Cross's picture

   Greece runs a surplus because they can't fucking afford to import anything because they're bankrupt and have shitty credit!

  Fixed it for you...Asshat Politicians.

Thu, 04/10/2014 - 10:00 | 4642883 Element
Element's picture

Well at least it's funny as hell, there is that.

Thu, 04/10/2014 - 09:56 | 4642881 Al Huxley
Al Huxley's picture

What's the all-in expected return, after factoring default on the principal?

Thu, 04/10/2014 - 10:03 | 4642911 Bernoulli
Bernoulli's picture

The German media are all cheering:

Der Spiegel online: "The return to capital markets: Investors shower Greece with billions"

Frankfurter Allgemeine Zeitung online: "Four years after the first cry for help to the EU, Greece is celebrating a successful comback to the capital marekts"

Die Welt online: "Greece is celebrating a comeback to the markets"

Handelsblatt online: "Greece obtains credit again"

This whole show has been put up to show the GERMAN people that "saving Greece" (= having hundreds of billions of Euros of their tax money stolen and handed over to some bankers and "investors" with Greek government as intermediary) was a huge success. Also, there will be European elections in May 2014 and many are scared of a rise of anti-Euro and anti-EU parties. And I am pretty sure European Banks were "instructed" accordingly, hence the high demand...

Sure, some media are mentioning that a car bomb exploded today on a sidewalk just opposite of the central bank building (as a warning sign?), but this is not top news. Please, guys, let's not spoil the good mood before Merkels visit to Greece tomorrow!!!

 

PS: Isn't it ironic that the European Parliament election campaign for the May elections has been branded "This time it's different"?

http://www.youtube.com/watch?v=UslDVJ2QSVM

 

 

Thu, 04/10/2014 - 12:57 | 4643900 CharlieSDT
CharlieSDT's picture

Good info there.

Thu, 04/10/2014 - 10:14 | 4642968 SmilinJoeFizzion
SmilinJoeFizzion's picture

Buying Greek bonds- Kind of like telling Steve Erwin not to swim with stingrays

Thu, 04/10/2014 - 10:25 | 4643009 Bernoulli
Bernoulli's picture

Nasdaq definition of Caa3:"Obligations rated Caa3 are judged to be of poor standing and are subject to very high credit risk"

Why would anyone in their right mind lend a party "of poor standing" any money for FIVE years (!), assuming a very risk of not getting it all back, and get only 5% yearly reward for that?? Why not invest in a company in Europe (since future growth is going to be so amazing)? Why not invest in real estate and rent it out?

The only reason I can see is: European growth is not happening and also these paper Euros (or should I say zeros and ones) that the "investors" are lending out are not worth anything anymore. As a test, next time Greece should ask for 100t of physical gold to be sent to them with a special transport and then they promise to pay 150 million EUR every year for 5 years and promise to give back the physical in April 2019.

Would that work?

Thu, 04/10/2014 - 14:05 | 4644147 Sofa King
Sofa King's picture

The people are happy about increasing their debt.

They celebrated with fireworks...

http://www.nytimes.com/2014/04/11/world/europe/bomb-explodes-outside-gre...

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