Greece Repays Samurai Bonds as Deal Reached With Creditors

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The Greek government repaid Samurai notes maturing Tuesday, according to bond agent Mizuho Bank Ltd., in a first sign the nation is honoring its obligations after reaching a deal with creditors.

Masako Shiono, a spokeswoman for Mizuho, confirmed the repayment. The outstanding amount was 11.67 billion yen ($95 million), according to data compiled by Bloomberg. The price of the securities fell to 44.73 yen against par on July 10, compared with 80.35 yen on June 1, the data show.

Greece chose to pay private investors while missing a further payment to the International Monetary Fund due Monday, increasing arrears to the global lender of last resort to about 2 billion euros ($2.2 billion). While the IMF will wait to get its money back, institutional investors wouldn’t, and a default on the Samurai bond would have complicated the repayment schedule, according to Daiwa Securities Group Inc.

“One default would trigger a cross default,” said Hiroaki Fujioka, a senior credit analyst in Tokyo at Daiwa, Japan’s second-largest brokerage. “Everybody would ask for their debt to be repaid, in an accelerated process.”

The latest Greek crisis hasn’t deterred Japanese fixed income investors from buying the bonds of European issuers in recent weeks. A unit of Credit Suisse Group AG sold 110 billion yen of Samurai notes July 10, while France’s Caisse des Depots et Consignations began marketing yen debt for sale this week.

The euro was little changed at $1.0996 as of 4:40 p.m. in Tokyo after dropping 1.4 percent Monday.

Repayment Extension

Greek Prime Minister Alexis Tsipras on Monday surrendered to European demands for immediate action to qualify for as much as 86 billion euros of aid needed to keep his country in the currency union. A request by the Greek authorities for an extension of a repayment due at the end of last month “is expected to be discussed by the Executive Board in the coming weeks,” the IMF said in an e-mailed statement.

Greece’s failure to repay 456 million euro to the IMF follows a missed payment in June. The nation’s IMF-backed bailout expired at the end of June and the country joined delinquent Sudan and Zimbabwe in being in arrears to the organization.

Tsipras has long promised he would seek a restructuring of his nation’s debt, setting up a showdown with official creditors. His party, Syriza, has repeatedly made clear it wouldn’t ask private bondholders to take further losses.

With today’s repayment, Greece avoids following Lehman Brothers Holdings Inc., which defaulted on the yen securities in 2008, as did Argentina in 2002. Greece has 24.5 billion yen of Samurai notes maturing in August of next year, together with yen debt sold outside of Japan.

Reject Austerity

Greece is running out of money and its banks have been shut for the the past two weeks since Tsipras surprised European leaders at the end of June when he called referendum and urged Greeks to reject austerity. Tsipras is now seeking to implement measures even harsher than those rejected by Greek voters in the July 5 referendum on austerity -- which he himself called after the previous round of discussions.

“The European central powers said we will destroy your economy unless you go along,” Nobel laureate Paul Krugman said in a Bloomberg Television interview. “It is actually a very sad day, it was a humiliation, a ritual humiliation for Greece.”

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