Greece to woo foreign investors

By David Oakley

Published: February 17 2009 16:26 | Last updated: February 17 2009 16:40

The Greek government is to launch a charm offensive in Asia and the US to try to attract investors as record levels of sovereign debt make it increasingly hard to raise funds in Europe.

Greece, whose credit rating was downgraded last month because of rising worries over its public debt, has been forced to pay much higher yields relative to Germany to raise debt owing to the deterioration in financial conditions and rising investor concern over the health of its economy.

The country plans to issue a 10-year bond next month of benchmark size, typically about €5bn. The gov­ernment will send deleg­ations to the US and Asia ahead of fundraising. Buyers of Greek bonds are typically split between domestic and other European investors.

Spyros Papanicolaou, director-general of the Greek debt management agency, said: “We have had more difficulties in attracting investors in a deteriorating climate, so it makes sense to look for investors elsewhere. We have seen spreads with Germany rise higher than they should, as Greek public finances are not in bad shape.”

Although the Greeks have not had problems reaching their targets for debt raising, yields have risen to record levels over Germany recently. On Tuesday they were trading about 300 basis points over Germany compared with about 60bp before the collapse of Lehman Brothers in September last year.

Other eurozone countries, such as Italy and Spain, are also considering looking at attracting more US and Asian investors to buy their bonds. With more than $1,000bn of bonds expected to be issued in Europe this year, a 25 per cent increase on 2008, investors have become more choosy.

On Wednesday last week, a German 10-year bond auction failed for the second time because investors decided to buy other eurozone debt, because they could pick up extra yield.

Greece is also considering launching more bonds in dollars – and even the yen – to attract a wider pool of investors. The last time it issued bonds in dollars was in June last year. It has not issued a bond denominated in yen since it joined the euro in April 2001. The last Greek yen-denominated issue was in the 1990s, Mr Papanicolaou said.

Eurozone countries typically issue debt in their own currency, although last year Spain, Italy and Belgium issued debt in dollars. But this was because it was cheaper than issuing debt in euros, not due to a desire to attract new investors.

Copyright The Financial Times Limited 2009