Greece’s Hellenic Republic Asset Development Fund is courting U.S. hedge funds as it seeks to lure investment in everything from ports to islands to finance the country’s bailout.
Officials at the privatization fund, charged with raising 11 billion euros ($15 billion) through state asset sales by 2016, met with billionaire hedge-fund manager John Paulson in New York earlier this week, according to the directors. Funds from Paulson & Co. to Third Point LLC, which profited from wagers that European officials would rescue the indebted nation as government bond yields peaked last year, have expressed interest in the assets, they said.
“There is improved sentiment about investing in Greece,” Andreas Taprantzis, the executive director of the fund, said in an interview at Bloomberg’s headquarters in New York yesterday. “Six months or a year ago investors were coming to Greece asking for returns of 30 percent, it was surreal.”
The fund is seeking to collect 3.6 billion euros next year through privatizations, a goal Taprantzis called “ambitious.” After failing to secure any bids for the national gas company Depa SA in June, the directors said Greece won’t be able to sell the company in 2014 either. The country plans to sell stakes in two ports in February and aims to conclude the sale next month of Hellenikon SA, a property which at 6.2 million square meters is more than three times the size of Monaco.
Yields on Greece’s 10-year government bonds have dropped to 8.56 percent from a peak of 37 percent in March 2012. They still pay 2.56 percentage points more than similar-maturity debt issued by Portugal and 5.13 percentage points more than Ireland.
Paulson, known for making $15 billion for his investors in 2007 by betting against subprime mortgages before the U.S. housing collapse, bought shares in Greece’s Alpha Bank SA in the third quarter as part of the lender’s recapitalization, a report to clients in October showed. His firm, which manages $18 billion, also bought warrants to purchase 7.41 additional shares for each common share.
Daniel Loeb’s Third Point said in April that it’s starting a hedge fund focused on buying Greek assets after a bet on the country helped drive gains last year for his $11.7 billion investment firm.
Elissa Doyle, a New York-based spokeswoman for Third Point, and Armel Leslie, a spokesman for Paulson with WalekPeppercomm in New York, didn’t respond to an e-mailed request for comment.
Revenue from Greece’s state asset sales program is earmarked to cover part of the country’s funding needs in the coming years under the country’s 240 billion-euro bailout from the euro area and the International Monetary Fund. Greece needs to meet targets to prevent funding shortfalls in the bailout plan from growing wider. The financing gap for 2014 is 4.4 billion euros, the IMF said in July.
Greece is in its sixth year of a recession that has destroyed about a quarter of its economic output and sent the unemployment rate soaring to more than 27 percent, the highest in the euro area. The country’s 2014 budget, which lawmakers approved on Dec. 8, forecasts the economy will return to growth next year as gross domestic product expands 0.6 percent.
Successfully completing the planned privatizations would add 2.5 percentage points to gross domestic product by 2016 and create 150,000 new jobs, Ioannis Emiris, the privatization fund’s chief executive officer, said in an interview, citing research by the Greek Finance Ministry.
While Greece originally agreed to a goal of raising 50 billion euros by 2015 through asset sales as part of austerity measures demanded by the EU and IMF, officials had to scale back on their plans as transactions were delayed.
Greece’s benchmark ASE Index was little changed at 1,146.26 in Athens today.
The sale of national gas company Depa, which attracted interest from Russia’s OAO Gazprom earlier this year, will not happen in 2014 while European authorities mull regulatory changes, Emiris said.
The privatization fund has closed 4 billion euros in deals so far, and collected 2.6 billion euros of that amount.
“I’m optimistic really,” said Taprantzis, who has been meeting with investors in New York this week. “Maybe we are not moving as fast as we should in relation to the magnitude of the crisis, but still, we are moving.”