Photographer: Petros Karadjias/AP Photo

Fed Up Berlin Bondholder Seeks Own Greek Exit Amid Deal Tiff

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Lutz Roehmeyer made a nice profit when Greece repaid its yen-denominated bonds this week. He’s now hoping to get out of his other Greek holdings.

“So much trust was destroyed,” said Roehmeyer, who oversees about $1.1 billion for Landesbank Berlin Investment, including the Weltzins-Invest fund, which beat 91 percent of peers over the past five years. “Greece is a failed state.”

Berlin-based Roehmeyer, who still holds euro-denominated Greek government debt, said the economy looked like a good investment last year when it was recovering, only to be undone by the Syriza election victory that propelled Alexis Tsipras to power in January. The money manager now plans to cut exposure as his remaining bonds mature or by outright sales when prices on longer-term notes recover.

After more than four hours of debate stretching into the early hours of Thursday, the parliament in Athens approved new austerity measures that are a precondition to as much as 86 billion euros ($94 billion) in aid. Germany could end up paying about 15 billion euros of that, bringing to 164 billion euros the country has provided to rescue the European nation, the Suedeutsche Zeitung said July 14.

Cologne-based fund manager ProfitlichSchmidlin AG owned Greece’s 5.25 percent yen-denominated sovereign notes maturing in February 2016, a March 31 filing shows. The Samurai notes are among the safest for creditors because they survived Greece’s 2012 debt restructuring without a cut to their principal or coupon, according to the firm.

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Too Uncertain

“We prefer to stand on the sideline for now and would consider buying more only after the bonds drop to real distress levels of 30 percent and below,” said Nicolas Schmidlin, the chief executive officer at ProfitlichSchmidlin, which manages about $100 million. “It’s still too uncertain” given the fragile Syriza coalition, the criticism with which the new proposal has been met and risk of snap elections, he said.

While German Chancellor Angela Merkel has been criticized for imposing stringent bailout conditions on Greece, her government is split on whether its continued euro membership is the best way forward, German Finance Minister Wolfgang Schaeuble said Tuesday. It’s unclear how the sustainability of Greek public dues can be achieved without debt forgiveness as long as the country is a euro member, he said on German radio Thursday.

Greece needs debt relief “far beyond” what European creditors have been willing to consider, including possibly deep “haircuts” on the value of Greek debt, the International Monetary Fund said in a new analysis this week.

Grexit Risk

“We would need to have conviction in two areas to be comfortable investing in Greece. Firstly, that the risk of Grexit had decreased substantially on a medium-term horizon,” Martin Harvey, a fixed-income manager at ColumbiaThreadneedle Investments in London, which doesn’t hold Greek bonds, said in a July 15 e-mail. “The other consideration would be debt sustainability, which is definitely not assured at this stage.”

For Roehmeyer at Landesbank Berlin, it’s so far so good. The Samurai bonds he bought at about 85 yen to par were redeemed in full on Tuesday, yielding a profit of about $315,000. His other investments include euro-denominated debt of Hellenic Railways Organization SA and Athens Urban Transportation Organization.

“A functioning public sector is missing in Greece,” he said. “Ordinary Greeks that pay their taxes always ask: For what?”

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