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Japonica Offers to Buy More Greek Bonds at a Lower Price

Japonica Offers to Buy More Greek Government Debt at Lower Price
Greek government bonds have dropped 12 percent since May 31, the last trading day before Japonica announced its offer, according to the Bloomberg Greece Sovereign Bond Index. Photographer: Kostas Tsironis/Bloomberg

July 1 (Bloomberg) -- Japonica Partners & Co., the U.S. investment firm that last month said it would buy as much as 2.9 billion euros ($3.8 billion) of Greek debt, cut the price it’s offering for the bonds and gave investors more time to accept.

Japonica will purchase Greek government bonds with a face value of as much as 4 billion euros, the Providence, Rhode Island-based firm said in a statement today. The company, run by former Goldman Sachs Group Inc. investment banker Paul Kazarian, lowered its minimum purchase price to 40 percent of the bonds’ principal amount, down from 45 percent a month ago, and gave investors until Aug. 1 to take up the offer.

The firm cut the price it’s prepared to offer because European officials may impose more losses on Greek bondholders, fractures in Greece’s coalition government and a potential 3 billion-euro to 4 billion-euro funding gap, Japonica said in the statement. The “volatile” and “highly illiquid” characteristics of Greek debt means the bonds don’t trade at their true value, the firm said.

Japonica’s offer hasn’t had “any market impact so far,” said Dimitris Drakopoulos, an economist at Nomura International Plc in London. Many holders of Greek government debt are hedge funds speculating that prices will go higher, not banks seeking to exit a volatile investment, he said. “People who are in are in for larger gains.”

Bonds Unmoved

Greece’s 10-year bonds expiring in 2023 were little-changed after Japonica’s offer today, with the price of the securities at 54.29 cents on the euro. The yield on the bond due in February 2023 was at 10.85 percent as of 12.15 p.m. London time, up from 9.39 percent at the close on May 31, data compiled by Bloomberg show. The country’s 30-year-bonds were at 42.3 cents.

Greek government bonds have dropped 12 percent since May 31, the last trading day before Japonica announced its offer, according to the Bloomberg Greece Sovereign Bond Index.

Japonica’s revised offer would account for more than 13 percent of the 29.6 billion euros of Greek government bonds outstanding. The firm first announced its plans on June 3, saying it would buy bonds in a tender offer expiring July 1.

Xander Heijnen, a spokesman for the investment firm at Munich-based CNC Communications & Network Consulting, declined to comment on whether Japonica has purchased any Greek bonds thus far or on how it is financing the debt purchases.

“While there has been a substantial decline in price and volatility remains high, Japonica takes a long-term perspective on Greece,” Heijnen wrote in an emailed response to questions.

Debt Buyback

European officials reduced Greece’s debt load through a March 2012 restructuring that imposed losses of more than 50 percent on investors holding bonds with a face value of 197 billion euros. The country’s debt was cut further through a December buyback that authorized the government to repurchase 31.9 billion euros of bonds.

“I don’t think anyone with a large position who bought Greek bonds after the buyback would sell at 40 or 45,” Nomura’s Drakopoulos said.

Kazarian founded Japonica in 1988, according to its website. The firm’s previous transactions include the $630 million purchase of Alleghany International and the $250 million initial public offering of Sunbeam-Oster after the maker of home appliances declared bankruptcy, according to the website.

To contact the reporter on this story: Jesse Westbrook in London at jwestbrook1@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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