In World Economy News 21/07/2015
A group of senior creditors to National Bank of Greece SA said they’ll consider recapitalizing the troubled lender to avoid incurring losses on their bonds.
“As sophisticated investors in financial institutions, our clients would consider increasing their financial commitments to NBG under appropriate circumstances,” Shearman & Sterling LLP, the law firm representing the group, wrote in a July 17 letter to international creditors including the European Central Bank and obtained by Bloomberg. “Our clients intend to ensure that their rights under all applicable laws are fully respected.”
Greece’s tentative bailout deal puts senior bank bondholders explicitly in line for losses because it requires the country to adopt the European Union’s Bank Resolution and Recovery Directive as a condition for aid. Greece’s existing insolvency law excludes a bail-in of the debt, according to Fitch Ratings.
The bondholders are seeking to ensure that Greece explores private-sector solutions before resorting to a bank resolution and that senior creditors are protected should it come to that, according to the letter, which was also addressed to the European Stability Mechanism, the vehicle set up to finance loans to distressed euro area countries, the president of the Eurogroup and the governor of the Bank of Greece.
The group holds about 25 percent of NBG’s 750 million euros ($812.5 million) of senior bonds due April 2019, according to a person familiar with the matter who asked not to be identified because the information is private.
Political Decisions
The bonds rose to 37 cents on the euro today after dropping by more than 70 percent since the start of the year to a record 21 cents on July 8, according to data compiled by Bloomberg. The notes represent about 40 percent of the 1.9 billion euros of privately-held senior debt issued by Greece’s four major banks, according to data compiled by Bloomberg.
Security guards stand at the entrance to a National Bank of Greece SA bank branch as pensioners attempt to collect their pensions in Athens, Greece, on Wednesday, July 1, 2015.
“The recent crisis arose entirely from decisions made by Greek and European political and monetary authorities that were wholly outside of NBG’s control,” the letter said. “Before additional capital and liquidity can be made available to Greek banks such as NBG, investors such as our clients, must have confidence in the Greek and European supervisory and resolution frameworks, and be assured of fair treatment.”
