(BN) National Bank of Greece Offers to Buy Back $2.5 Billion Debt

Posted by on Jan 3, 2012 in Uncategorized | No Comments

My head must still hurt from New Year’s Eve, but if I understand this, NBG issued preferreds to the Greek government (who just happened to have some money lying around).  That raised their capital.  Now they are going to buy back some debt with that money.  The discount will count as “earnings” thus also increasing their capital.  I think buying back preferreds does less, though if the discount is enough, it might be worth it.

It is all an illusion.  Greece has no money to lend to NBG.  NBG couldn’t raise money from a real investor at almost any price.  Yet, here we are with NBG getting money and buying back debt.  We know that Italy has gone full ponzi with banks issuing debt to themselves in order to get it guaranteed by the government, so they can post it at the ECB to get money to buy government debt, but clearly Greece has its own version.  Who knows what Portugal and Spain are doing, but I suspect they have their own methods of creating the perception that things are better than they really are.

It seems that each country is becoming closer to its banks.  It is becoming more difficult to separate the banks from the state.  Maybe it works, but I doubt it.  Does it make it easier to leave the Euro if the banks and state are more closely tied together?

National Bank of Greece Offers to Buy Back $2.5 Billion Debt (1)
2012-01-03 11:44:33.18 GMT
     (Adds tender amount in first paragraph. See EXT4 <GO> for
more on Europe’s debt crisis.)
By Maria Petrakis
     Jan. 3 (Bloomberg) — National Bank of Greece SA, the
country’s biggest lender, offered to repurchase about $2.5
billion of bonds and hybrid securities to boost capital amid
Europe’s sovereign debt crisis.
     National Bank sought to buy back 1.5 billion euros ($2
billion) of 3.875 percent covered bonds due in October 2016 as
well as five series of preferred securities in euros, dollars
and pounds, it said in an e-mailed statement. The Athens-based
lender offered to pay 70 percent of face value for the covered
bonds and 45 percent for the preferred hybrids, below where they
were issued and above where they’re currently trading.
     “The purpose of the offers is to generate core Tier 1
capital for the group and to strengthen the quality of its
capital base,” the bank said. “The offers would generate a
gain for the group.”
     Buying back debt at a discount to face value generates a
gain in so-called core Tier 1 capital after Greek banks’
holdings of government bonds diminished this cushion against
losses, sent stock prices plummeting and prompted depositors to
move savings overseas. The government in Athens is negotiating a
debt swap with bondholders to secure more international
financing, which may further hurt lenders’ capital.
                         Price Jump
     National Bank’s covered bonds, which were issued at 99.24
cents on the euro in September 2009, were quoted at 63.5 cents
as of 11:05 a.m. in London, after jumping from 50.7 cents
yesterday, according to DZ Bank AG prices.
     The lender’s 117.5 million euros of floating-rate perpetual
preferred securities callable in 2013 were priced at 100 cents
in June 2003, Bloomberg data show. They were quoted at 40 cents
by Jefferies Intl. today, double the price on Dec. 21, 2011.
     Credit Suisse Group AG, Deutsche Bank AG, Bank of America
Merrill Lynch and Morgan Stanley are managing the tender,
according to the statement.
     National Bank completed a 1 billion-euro issue of preferred
shares to the Greek state last week, raising the core Tier 1
ratio to more than 11 percent, according to a statement
yesterday. Greek banks have been required since the beginning of
this year to hold capital equal to 10 percent of their assets
weighted by risk.
For Related News and Information:
National Bank news: ETE GA <Equity> CN <GO>
European crisis monitor: CRIS <GO>
Top bond stories: TOP BON <GO>
Top financial news: TOP FIN <GO>
Greek economic coverage: NI GRECO <GO>
–With assistance from John Glover in London. Editor: Paul
To contact the reporter on this story:
Maria Petrakis in Athens at +30-210-741-9080 or
To contact the editors responsible for this story:
Angela Cullen at +49-69-92041-158 or
Paul Armstrong at +44-20-7330-7185 or