National Bank of Greece Offers Debt Swap Following Stress Tests

A main branch of the National Bank of Greece in Thessaloniki, Greece.

A main branch of the National Bank of Greece in Thessaloniki, Greece.

Photographer: Konstantinos Tsakalidis/Bloomberg
  • Greece's four big lenders have all announced debt exchanges
  • Banks seek to swap 3.4 billion euros of bonds to boost capital

National Bank of Greece SA became the last of the nation’s four major lenders to offer a debt exchange as they seek to cover 14.4 billion euros ($16 billion) of capital shortfalls.

The lender intends to exchange 803 million euros of senior and junior bonds for shares, according to a statement released on Monday. There’s no cash alternative in the debt swap, which covers euro, dollar and sterling notes.

National Bank, Piraeus Bank SA, Eurobank Ergasias SA and Alpha Bank AE have announced bond exchanges totaling 3.4 billion euros of debt as they seek to recapitalize following the Greek economy’s near-collapse. The European Central Bank identified a 4.6 billion-euro shortfall at Athens-based National Bank, under stress tests designed to see how the four lenders would perform if the economy deteriorated further.

Under National Bank’s debt exchange, investors can swap senior notes for shares equal to 100 percent of the bonds’ face value, according to the statement. There’s a 75 percent ratio for Tier 2 notes and 30 percent for Tier 1 securities. The stock price in the swap will be equal to the issue price in an upcoming sale of new shares.

The ECB announced the results of the stress tests on Saturday. The 14.4 billion euro total capital gap includes a less-than-expected 4.4 billion-euro hole under baseline macroeconomic assumptions, which will probably be covered by private means, the central bank said.

The remaining 10 billion euros may all be provided by the Greek government’s Hellenic Financial Stability Fund, with 25 percent from the purchase of common shares and 75 percent via contingent convertible bonds, according to a statement.

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