Greece debt buyback

In June this year i received a comment on my OPAP analysis. The commentator expressed that the Greek state could buy back his own debt at a discount of over 80%.
In my reply i dismissed this idea because of a) the lack of money to repurchase and much more important b) the price increases of the bonds since capital market participants would start accumulating Greek government securities themselves.

I haven't changed my opinion, still think its bogus, however according to recent media reports this idea is becoming popular with influential politicians.

Now, after the agreement on further payments for Greece, on part of the deal seems to give Greece time to implement a buyback program.
This article states that the new cash will be used to repurchase bonds. The program is to be completed until December 13 (although i would be careful with Greek time scheduling)
Obviously it finally became clear to all politicians that Greece will not be able to meet its targeted debt levels (how should they?). A further haircut is politically not wished (Merkel ala "saving Greece will cost German tax payer no cent"), so a buyback is the way to go.

Winners: Hedge-Fonds, Speculative Investors making huge gains in short time.
Looser: Greek people and economy not receiving any (or less) aid money; EU still to coward to execute real solutions.

Update 28/11: Greek banks will suffer too since if they accept the buyback, they will take the loss resulting from nominal amount (that is in their books) - buyback offer.
This articel (German) states a range between 30%-35%  as a buyback offer, depending on mark to maturity. The offer is said to be lower than the last quotes on the 23. of November. By then a lot of Hedge Funds already got involved, as on can clearly see in the increasing prices.


/Edit 17.07.2013: Now the 10 bn used in the buyback seem to be missing, funding gap. Frustrating...

Interesting reads

So today is the day of the (second) election in Greece, what a lot of journalists are picturing as the final battle for/against the Euro: Good, old pro-EUR party (ND) against greedy, untrustworthy far left newcomers, screaming to get kicked out of the Euro zone.
In my opinion this is exaggerated, at least on the short run I expect Greece to stay with the Euro, since both parties want to -more or less- renegotiate the cuts and the EU (Hollande) will probably be willing to talk too, despite Merkels no-negotiation announcements.
Anyway im exited to see the outcome of the votes and market-reaction on Monday.

Now lets come to the links:
1. After his series of posts on growth (recommendation!)  Aswath Damodaran is following up with a series about Value Investing, starting two weeks ago with Value Investing: An Identity Crisis? and more recently Passive value investing: Screening for bargains. Interesting in the last post are, besides his very good instructions of how screening stocks is actually done, his closing thought on the moat of the investor and his odds of success.
2. The Brooklyn Investor on "the good old times" and todays market environment, with high-frequency trading, volatility, revolving doors and too efficient markets.
3.Value Walk on stocks and the Greek elections, seeing investment opportunities in Greece.

Thats it for now, have a nice sunday!

OPAP: Greece and privatization of state owned companies

This is a somewhat more abstract post about the announced privatizations of Greek state owned shares in listed companies.

I’m not a big fan of privatizations, especially when some of the companies are true cash-cows, however this is something that really strikes me and I think those are good examples for current problems.

If privatizations have to be done, they should be done right, i.e. maximizing the potential income from the selling. Now let’s come to the way it’s done in reality.

The plan of privatizing assets was officially introduced in mid-2011, with a goal of 50 billion Euros in revenues from asset sales until 2015, starting with 5 billion in 2011. A plan which was already back then heavily doubted by the public.
Now it’s Mai 2012 and the sale of OPAP (gambling) and Hellenic Petroleum is delayed until the new elected government.

So let’s calculate a bit: One year ago OPAP was traded at 13,38 EUR, HePetro at 7,13 EUR, yesterday it was 4,40 EUR and 5,06 EUR, respectively.

We will continue with OPAP only:

-27/01/2012: Government transferred 29% of all OPAP shares to the Hellenic Asset Development Fund based on a law dating 27.10.2011.
-This are a total of 92.510.000 shares transferred to the fund in order to be sold.
-Which were then expected to be (partially) offered in March.
-Until now nothing happened, sell-offs are on ice until new elected government gives new directions

I put my calculations into this graphic:

 

So up to now there is more than half a billion loss thanks to this slowly process and this is only ONE company, out of several (plus all the other non-listed assets).

And further losses are to be expected; the biggest institutional investor left the ship, selling off his shares.