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Japonica Says Greek Government Bond Yields Falling to 5% in 2014

Japonica Partners & Co., the U.S. investment firm that offered to buy as much as 4 billion euros ($5.5 billion) of Greek government bonds, expects yields on the securities to drop to 5 percent early next year, a level last seen in 2009.

“Greece has accomplished what most would have thought was impossible,” founder Paul Kazarian said today in his first public comments since the firm announced its tender offer in June. The market has been “almost certainly wrong, particularly in comparison to euro-zone peers.”

Japonica’s offer expired last month and the firm said it’s now one of the largest holders of Greek government debt, without disclosing how many bonds it owns. The Providence, Rhode Island-based firm paid as little as 11.4 percent of face value for the bonds it purchased, Kazarian said on a conference call. It expects the debt to be valued at more than 85 percent by next year, he said.

Greece’s 10-year bonds advanced today, with the yield dropping five basis points, or 0.05 percentage point, to 9.25 percent as of 5 p.m. in London. That’s down from as much as 11.94 percent in July. The yield was last below 5 percent in December 2009.

The price of the 2 percent security maturing in February 2023 was 62.15. On May 31, the last trading day before Japonica announced its offer, the securities yielded 9.39 percent, with the price at 60.325. Greek government bonds have returned 3.3 percent since May 31, according to the Bloomberg Greece Sovereign Bond Index.

Kazarian started Japonica after leaving Goldman Sachs Group Inc. Japonica gained prominence in the U.S. during the late 1980s and early 1990s for deals including an attempted buyout of food company Borden Inc., a failed $1.6 billion takeover of railroad operator CNW Corp. and the purchase of appliance maker Sunbeam-Oster Co.

Japonica will continue to focus on investing in companies the firm deems undervalued, which is the firm’s “core competency,” Kazarian said when asked on the call whether it will use its Greek bonds to acquire state assets in the country.

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