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Diamond trade in Belgium flourishing

by on January 19, 2012

menafn.com…

(MENAFN – Kuwait News Agency (KUNA)) The Belgian diamond industry’s turnover last year rose by 47 percent to reach 44.6 billion euros from 30.1 billion euros in 2010. The rise is due to the …

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Diamond trade in Belgium flourishing

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No More Bailouts For Ireland, Though

by on May 30, 2011

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DUBLIN (Carmel Crimmins) – Ireland’s government moved on Monday to quash speculation it would be forced to seek a second EU-IMF bailout and said it would make a tentative return to international debt markets in the final quarter of next year. Dublin is trying to distance itself from the woes of euro zone struggler Greece, which is trying to avoid a potentially devastating default and seems certain to require a second bailout to plug a looming funding gap. Finance Minister Michael Noonan categorically ruled out Dublin requiring a top-up to its 85 billion-euro rescue package, seeking to limit the fallout from a cabinet colleague’s warning over the weekend that another bailout may be needed. “There is no question of a bailout package having to be brought in next year,” Noonan told state broadcaster RTE. “We have sufficient money from the IMF and European institutions to carry the country forward in all eventualities and the program runs until the end of 2013.” “A second bailout doesn’t arise because of that.” Noonan said Dublin would test market sentiment for Irish debt in the final quarter of 2012 after a two-year hiatus. “We won’t be fully back in the markets but we hope that the NTMA (debt management agency) will be able to raise some private funds in the market in the last quarter of next year.” Many economists have come round to the view that some sort of further aid and restructuring of its debt is likely to be inevitable to allow Greece to deal with a debt burden of more than 150 percent of its annual national output. Ireland’s debt is expected to peak lower than that but still top 120 percent of GDP in 2013 and Irish bond yields have sky-rocketed as Greece’s debt crisis deepened, reflecting market concerns it may face a similar fate. The Irish central bank said investors needed further reassurance that its EU-IMF program was on track. “Market spreads on Irish government paper have moved in the wrong direction since the program started… markets probably need more time to see persistent adherence of the program,” Governor Patrick Honohan told national broadcaster RTE. “Continued adherence to the path is the way to get back to the markets,” he said. ‘A BIG ASK’ Analysts said even with a clean EU-IMF report card, Dublin faced an uphill challenge. “We currently have 5 year paper trading at 12 percent, 10 year paper trading at 11. Clearly if this is where we are next year Ireland is not going to capital markets. I think yields have to get into single digits and heading south,” said Padhraic Garvey, rate strategist at ING. “It’s a big ask. It’s not impossible, but it’s a big ask.” The average interest rate Ireland is paying on its EU and IMF loans is estimated at 5.8 percent. Of the 85 billion euros bailout, some 17.5 billion euros is from existing state borrowing and cash balances and 35 billion euros is earmarked to shore up the banks. Ireland and its creditors are hoping that only 19 billion euros of that 35 billion will have to be channeled into the banks and the IMF has said that whatever is left over could be used by the state if there is a delay in returning to markets. Dublin is currently forecasting a deficit in 2013 of 12 billion euros. Brian Devine, economist with NCB Stockbrokers, said he still believed Ireland would have to tap the ESM, the EU’s permanent rescue fund, in 2013. “I don’t see how things are going to clear sufficiently for it to be otherwise,” he said. “The government will dip their toes first by issuing treasury bills but that will be to provide some short-term liquidity and gradually work our way back into the market.” Tapping the ESM might require some restructuring of privately held sovereign debt. Reflecting that medium-term risk, Ireland’s two-year and five-year paper are yielding around 12 percent, more than its 10-year bonds on the secondary market. Irish officials have insisted that their economy is on a growth trajectory, unlike Greece, but Honohan said there was no guarantee that Ireland would recover this year. “Nobody can be absolutely sure that there will be growth this year — our forecast is that there will be some growth in GDP this year but the margin of error is sufficiently small that nobody can be sure that it will actually be positive,” he told RTE. “It’s only in 2012 that we can forecast the return to what we would like to see as solid growth.” (Additional reporting by Padraic Halpin and Conor Humphries; editing by Patrick Graham) Copyright 2011 Thomson Reuters. Click for Restrictions .

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No More Bailouts For Ireland, Though

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Greece announce 76 billion euros austerity measures

April 15, 2011

Greece announce 76 billion euros austerity measures

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Irish Banks Might Need Another Expensive Bailout

March 25, 2011

BRUSSELS – European finance ministers will decide on any necessary changes to Ireland’s bailout programme after the results next week of stress tests on Irish banks, the president of the European Council said on Thursday. Any decision would have to wait, Herman Van Rompuy said after chairing a meeting of EU leaders, who met against a backdrop of mounting concerns that Ireland may need more than the 35 billion euros ($49 billion) set aside under an EU/IMF bailout to prop up its banks. “We need to have those results to evaluate the consequences on the programme,” he told reporters, commenting on stress tests to check the health of Irish banks. “Then we can make a decision as soon as possible at the level of the finance ministers.” The European Central Bank, which is supporting Irish banks by lending them money they would normally borrow from peers, wants to gradually withdraw this, but Irish Prime Minister Enda Kenny is seeking support among EU leaders for more leeway. Earlier this week, Irish Finance Minister Michael Noonan made a similar plea for more flexibility to ECB President Jean-Claude Trichet. Dublin is also worried that pressure from the ECB could force a firesale of bad Irish loans and exacerbate its problems. But with bank stress tests still under way and any preliminary findings under wraps, Kenny was unable to soothe concerns about a larger rescue bill. “I think it’s much more important to be absolutely clear about the extent of the liabilities before we make any further discussions or negotiations,” Kenny said earlier, as he entered the leaders’ meeting. “From that point of view I have agreed that I will come back … when the extent of the stress tests are actually known,” said the Irish prime minister, who had originally hoped to win concessions on the interest rate charged on bailout loans. UNANSWERED QUESTIONS In a draft statement due to be published after the summit, the leaders outline only their ambition to agree on a plan to restructure troubled banks and decide how governments can help them. They are set to leave many questions unanswered, including how Ireland could be helped further if its existing bailout loans are not enough. Nor will they agree on the technicalities of how to increase the lending capacity of the European Financial Stability Facility, the current EU scheme to help countries in financial difficulty. ECB loans outstanding to banks in Ireland hit 117 billion euros ($165 billion) last month, more than a third higher than a year ago. The Irish central bank has also more than quadrupled its lending to the country’s banks, to 70 billion euros, over the same period. The ECB is working on a plan to wean struggling banks in Ireland and elsewhere that remain reliant on its funding. German central bank chief Axel Weber hinted that could be ready by the third quarter of this year. The Irish government also hopes to hand losses to some senior bondholders in Irish banks, a move many both in Brussels and other European capitals fear could prompt a new investor scare. Such a move could affect the more than 11 billion euros of bonds issued by Irish banks AIB and Bank of Ireland. These are not covered by a state guarantee handed out in haste to protect Irish banks, but which saddled the taxpayer with a bill many believe is unmanageable. But many EU countries oppose such a step. “This would be adventurism and reckless policy making,” said one official. Ireland will have the results of its banking sector stress tests by the end of next week, though it is still not clear how high the bar will be for banks to pass these financial health checks. The last round of tests were branded useless after Irish banks were given a clean bill of health — only months before the EU and International Monetary Fund were called to provide a bailout. (Additional reporting by Marc Jones in Frankfurt, editing by Rex Merrifield/Stephen Nisbet/Ruth Pitchford) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Video: Grodzki Says Spanish Auction `Bodes Well’ for More Sales

January 13, 2011

Jan. 13 (Bloomberg) — Georg Grodzki, head of credit research at Legal & General Investement Management, talks about the results of today’s Spanish debt auction. Investors bid for 2.1 times the 3 billion euros ($3.9 billion) of Spanish five-year bonds sold today. Grodzki speaks with Andrea Catherwood on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

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Video: Grant Says Ireland `Going Bankrupt,’ EU Rescue a `Sham’

November 8, 2010

Nov. 8 (Bloomberg) — Mark Grant, managing director at Southwest Securities Inc., and John Brynjolfsson, chief investment officer at Armored Wolf LLC, talk about Ireland’s sovereign debt crisis. European Union Economic and Monetary Affairs Commissioner Olli Rehn said today he endorses the Irish government’s plan to cut spending and raise taxes by as much as 6 billion euros ($8.4 billion) in 2011. (Source: Bloomberg)

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Video: Loescher Expects Surge in Siemens Green Technology Sales

November 8, 2010

Nov. 8 (Bloomberg) — Siemens AG Chief Executive Officer Peter Loescher talks about the company’s prediction for green technology sales. Siemens aims to grow revenue from solar equipment, wind turbines and other energy saving products to 40 billion euros ($55 billion) by 2014 compared to 28 billion euros in the fiscal year through September. Loescher speaks from Munich with Mark Barton on Bloomberg Television’s “Countdown.”

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Deutsche Bank plans to raise 10.2Â billion euros

September 21, 2010

Deutsche Bank plans to raise 10.2Â billion euros

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Deutsche Bank plans to raise 10.2Â billion euros

September 21, 2010

Deutsche Bank plans to raise 10.2Â billion euros

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Deutsche Bank plans to raise 10.2Â billion euros

September 21, 2010

Deutsche Bank plans to raise 10.2Â billion euros

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Video: Fitzpatrick Discusses Deutsche Bank Sale Share Outlook: Video

September 9, 2010

Sept. 9 (Bloomberg) — William Fitzpatrick, analyst at Optique Capital Management, talks about how Deutsche Bank AG might be considering a stock sale of as much as 9 billion euros ($11.4 billion) to boost its stake in Deutsche Postbank AG and meet stricter capital rules. Fitzpatrick speaks with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart.” Steven Kroll, managing director at Monness Crespi Hardt & Co. also speaks. (Source: Bloomberg)

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Video: Deutsche Bank Said to Weigh EU9 Billion Share Sale: Video

September 9, 2010

Sept. 9 (Bloomberg) — Bloomberg’s Dominic Chu talks about reported plans by Deutsche Bank AG for a stock sale of as much as 9 billion euros ($11.4 billion). Three people with knowledge of the discussions said Deutsche Bank has approached investment banks to assess their interest in managing the sale. Chu speaks with Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Video: Balatro’s Skinner Says Stress Test Methods `Pretty Weak’

July 26, 2010

July 26 (Bloomberg) — Chris Skinner, chief executive officer of Balatro Ltd., a banking industry research firm, talks about the criteria used to conduct stress tests on 91 European banks. European Union stress tests found banks need to raise 3.5 billion euros ($4.5 billion) of capital, leaving doubts about whether regulators were tough enough. Skinner speaks with Maryam Nemazee on Bloomberg Television’s “Countdown.”

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Video: Rabobank’s Foster Discusses European Bank Stress Tests: Video

July 26, 2010

July 26 (Bloomberg) — Adrian Foster, head of financial-markets research for Asia at Rabobank Groep NV in Hong Kong, talks with Bloomberg’s Linzie Janis about the results of stress tests on European banks and the outlook for the region’s economies. European regulators found that seven banks need to raise a combined 3.5 billion euros ($4.5 billion) of capital. Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks didn’t have adequate reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said on July 23. (Source: Bloomberg)

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Video: Berlusconi Targets Fraudulent ‘Blind’ in Budget Cuts

July 1, 2010

July 1 (Bloomberg) — Bloomberg’s Flavia Rotondi reports on fraudulent disability benefit claims in Italy. Prime Minister Silvio Berlusconi has declared war on welfare swindlers as he seeks to cut Italy’s budget deficit by about 25 billion euros. Disability benefits from Italy’s pension agency account for 16 billion euros a year, or 1 percentage point of the country’s gross domestic product.

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Corporate Bond Sales Slump for Seventh Week in U.S., End Drought in Europe

June 11, 2010

By Craig Trudell and Caroline Hyde June 11 (Bloomberg) — U.S. Bancorp , the Minnesota lender, and tobacco company Altria Group Inc. led $7.9 billion of corporate bond sales in the U.S. as issuance fell short of the 2010 average for a seventh straight week. U.S. Bancorp, the sixth-largest U.S. bank by assets, sold $1 billion of three-year debt in its fourth offering this year, according to data compiled by Bloomberg. Marlboro cigarette maker Altria issued $800 million of 5 1/4-year notes as it prepares to repay $775 million of bonds this month. In Europe, companies issued 2.9 billion euros ($3.5 billion) of debt, up from the 2.1 billion euros of sales last week that ended a two- month drought. The extra yield investors demand to own U.S. investment- grade corporate debt instead of Treasuries rose 5 basis points this week to 213 basis points, the highest since Dec. 8, according to the Bank of America Merrill Lynch U.S. Corporate Master Index, while spreads in Europe also widened. Europe’s debt crisis and lower-than-estimated U.S. job growth have fueled skepticism about the global economic recovery, said William Larkin , fixed-income portfolio manager at Cabot Money Management. “You’ve got investors changing their minds very rapidly, and that’s never a great indication of economic health,” said Larkin, who helps oversee $500 million at Salem, Massachusetts- based Cabot. “We have a bond market that’s extremely expensive, and that combination makes people like myself nervous.” Company bond sales rose in Europe, with deals from Caterpillar Inc., the largest maker of construction equipment, and U.K. bus and rail operator National Express Group Plc. Bond Redemptions Issuance climbed as 81 billion euros of securities come due this month, the most so far this year, according to ING Groep NV data. Investors may use some of the money they get back from maturing bonds to buy more securities, driving the first companies to return to the market after issuance plummeted 66 percent to a record-low 14 billion euros in May amid the region’s sovereign debt crisis. “Bond redemptions are forcing cash into the hands of investors and many will be losing patience earning the lower rates” from other investments, said Charles Stephens of Matrix Corporate Capital Ltd. in London. “When faced with a solid investment-grade company like Caterpillar or a high enough premium from a lower-rated issuer like National Express, there will be buyers for the debt.” The number of bonds coming due in Europe will reach 81 billion euros in June, up from 60 billion euros in April. Redemptions for the year are forecast to reach 700.6 billion euros, according to ING. U.S. Sales Overall U.S. company bond sales declined 2 percent and have trailed the average for this year in every week since April 23, according to Bloomberg data. Absolute U.S. bond yields rose to 4.66 percent from 4.51 percent, Bank of America Merrill Lynch index data show. A basis point is 0.01 percentage point. Spreads on high-yield bonds in the U.S. widened 5 basis points to 719 basis points this week, Bank of America Merrill Lynch index data show. They touched 727 on June 8, the highest since Dec. 8. Yields rose to 9.49 percent from 9.33 percent. High-yield, or junk, bonds are those rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s. High-yield U.S. bond sales of $1.2 billion were less than a quarter of this year’s weekly average, Bloomberg data show. Junk issuers are poised to fall short of the $6.8 billion of securities sold in May, the lowest since March 2009. “Lower-grade” corporate bonds are “really cheap,” Dan Fuss , who helps oversee $145 billion of assets as vice chairman of Loomis Sayles & Co., said yesterday in a Bloomberg Television interview. “By being a buyer when there’s a thin market, you can get some reasonable values,” he said. This week’s U.S. corporate bond sales compare with $8.1 billion during the period ended June 4 and a 2010 average of $19.7 billion, Bloomberg data show. “You have to watch what you’re buying and watch the spreads you’re buying at,” said Cabot’s Larkin. “Because if you don’t, it could backfire pretty quickly.” To contact the reporters on this story: Craig Trudell at ctrudell1@bloomberg.net ; Caroline Hyde in London at chyde3@bloomberg.net

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Greece to Reduce Spending, Raise Taxes as Part of EU-IMF Package: Summary

May 2, 2010

By Maria Petrakis and Natalie Weeks May 3 (Bloomberg) — Greece outlined the conditions it accepted in return for a bailout from the European Union and International Monetary Fund of more than 100 billion euros ($133 billion). Following is a summary of a Greek-language document distributed by the Finance Ministry in Athens yesterday. Implementation: * Greece’s progress in achieving targets will monitored on a quarterly basis. “Normal” continuation of the financing will depend on its success in reaching the goals. Spending Cuts: *Reducing the so-called 13th and 14th holiday payments for civil servants and cutting bonuses by a further 8 percent to save 1.1 billion euros in 2010. Workers earning less than 3,000 euros a month will get payments of 250 euros at Easter, 250 euros in summer and 500 euros at Christmas. Employees at state- run companies will have wages cut by 3 percent. *Reducing the 13th and 14th holiday payments to pensioners to save 1.5 billion euros in 2010. Retirees receiving less than 2,500 euros per month will get 200 euros, 200 euros and 400 euros for each period. *Postponing the second tranche of so-called solidarity bonuses to 2.5 million poorer Greeks, a pre-election pledge, to save 400 million euros in 2010. *Cutting public investment plan by 500 million euros this year. Revenue Raising: *An increase in the two main sales-tax rates to 23 percent from 21 percent and to 11 percent from 10 percent. That’s equivalent to 800 million euros in 2010 and 1 billion euros in 2011. *Cigarette, fuel and alcohol tax increases to raise 450 million euros in 2010 and 600 million euros in 2011. Economic Forecasts: * Economic contraction of 4 percent this year and 2.6 percent in 2011. Growth will return in 2012 at 1.1 percent and 2.1 percent in 2013 and 2014. *Debt will rise from 133.3 percent of GDP this year to 145.1 percent in 2011, 148.6 in 2012 and peak at 149.1 percent in 2013. It is projected to fall to 144.3 percent in 2014. * Budget deficit will shrink to 8.1 percent this year, 7.6 percent next year, 6.5 percent in 2012, 4.9 percent in 2013 and below the 3 percent demanded by the European Union in 2014. To contact the reporters on this story: Maria Petrakis at mpetrakis@bloomberg.net ; Natalie Weeks in Athens nweeks2@bloomberg.net

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BASF First-Quarter Profit Beats Estimates as Demand for Plastics Recovers

April 28, 2010

By Cornelius Rahn and Richard Weiss April 29 (Bloomberg) — BASF SE, the world’s biggest chemical company, said profit more than doubled in the first quarter, boosted by recovering demand for plastics and products used in the automotive and electronics industries. Net profit increased to 1.03 billion euros ($1.4 billion) from 726 million euros, the Ludwigshafen, Germany-based company said in a statement today. Analysts surveyed by Bloomberg predicted 899 million euros. Sales also topped estimates. Carmakers and other chemical users are rebuilding inventories depleted during the financial crisis and BASF is forecasting higher sales in 2010 and a significant increase in earnings for 2010. BASF has advanced 6.7 percent this year, for a market value of more than 42 billion euros. Dow Chemical Co. shares have climbed 15 percent. Sales totaled 15.5 billion euros, beating the 14.37 billion euros predicted by analysts. Earnings before interest and tax was 1.8 billion euros. The German chemical maker matched rivals who also surprised analysts. Dow reported profit that topped estimates yesterday, driven by higher sales of commodity plastics such as polyethylene. DuPont Co., the third-biggest U.S. chemical maker, more than doubled first-quarter profit and raised its 2010 earnings forecast. BASF also benefited from a rising oil price. Crude Oil futures averaged $79.26 in the quarter ended March 31, compared to $44.35 in the quarter last year, according to Bloomberg data. Chief Executive Officer Juergen Hambrecht plans to cut at least 1 billion euros in costs by 2012. The worst chemical industry slump for 35 years prompted the 63-year-old to place more than 4,000 employees in Germany on shorter hours to trim expenses by shuttering plants. In addition, the merger of Ciba Specialty Chemicals into BASF should generate annual savings of 450 million euros by 2012 through the elimination of as many as 3,800 jobs. Possible Purchase The CEO may now be preparing his next major purchase. BASF is preparing a bid for Germany’s Cognis GmbH that may value the closely held chemical maker at about 3 billion euros, two people with knowledge of the situation said in early April. Cognis, owned by Goldman Sachs Group Inc. and Permira Advisers Ltd., is drawing bidders with its ingredients for body lotions, cleaning products and shampoos, products that are more resistant to economic cycles than those directly derived from oil and gas. A purchase by BASF would further Hambrecht’s drive to steer BASF away from commoditized chemicals. To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net Richard Weiss in Frankfurt at rweiss5@bloomberg.net .

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Video: Callow Says Aid Package Builds `Firewall’ Around Greece

April 26, 2010

April 26 (Bloomberg) — Julian Callow, chief European economist at Barclays Capital, talks with Bloomberg’s Maryam Nemazee about Greece’s formal request for aid from the International Monetary Fund and European Union. Greece asked to activate the funding mechanism agreed by euro-area nations on April 23 worth as much as 45 billion euros ($60 billion).

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Daimler Returns to First-Quarter Profit on Sales of Mercedes-Benz Vehicles

April 19, 2010

By Aaron Kirchfeld April 19 (Bloomberg) — Daimler AG , the world’s second- biggest maker of luxury cars, returned to profit in the first quarter, helped by the sale of Mercedes-Benz cars. The Stuttgart-based carmaker reported preliminary earnings before interest and taxes including special items of 1.2 billion euros ($1.6 billion) after a loss of 1.4 billion euros in the year-earlier period, Daimler said in a statement today. Revenue was 21.2 billion euros in the period. Profit was boosted by “very solid results” at the Mercedes-Benz Cars unit, which reported Ebit of 806 million euros, on “strong” sales, model mix and pricing as well as a “favorable overall cost position,” Daimler said. The Mercedes- Benz Cars unit expects Ebit of 2.5 billion euros to 3 billion euros from ongoing business this year, the company said. The Daimler Trucks unit posted first-quarter Ebit of 130 million euros and forecast full-year profit of 500 million euros to 700 million euros. Daimler Financial Services had first- quarter Ebit of 119 million euros, the company said. To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

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Germany to Review Possible Legal Steps Against Goldman, Merkel Aide Says

April 17, 2010

By Tony Czuczka April 17 (Bloomberg) — Germany may take legal action against Goldman Sachs Group Inc . after the U.S. Securities and Exchange Commission said it was suing the company on fraud charges, government spokesman Ulrich Wilhelm said.      The German financial regulator, Bafin, “will ask the SEC for information,” Wilhelm, main spokesman for Chancellor Angela Merkel , said today by phone. “Then we will look at the records and consider possible legal steps.” Goldman was sued yesterday by U.S. regulators for fraud tied to collateralized debt obligations that contributed to the financial crisis. In the complaint, the SEC cited Dusseldorf- based IKB Deutsche Industriebank AG as a purchaser of part of the CDO at issue. In 2008, Germany’s state-owned KfW development bank pumped almost 10 billion euros ($13.5 billion) into IKB to shore up the German banking system.      It’s too early to say whether any legal action will relate to IKB, Wilhelm said. “First we have to ask for information,” he said. To contact the reporter on this story: Tony Czuczka in Berlin at aczuczka@bloomberg.net

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Greek Bonds Show EU Rescue Package May Be Tapped as Borrowing Costs Rise

April 15, 2010

By Matthew Brown April 15 (Bloomberg) — Greek bonds show the nation may have to tap a 45 billion-euro ($61 billion) international bailout to convince investors it can avoid a default. The government’s two-year notes fell for a second day yesterday and the cost of insuring against default approached the record high of April 8, three days before euro-region finance ministers announced the aid package. The parliaments of Germany, France and Ireland will have to vote on whether to contribute their share of the loans, government spokesmen said yesterday. Dutch lawmakers will discuss Greek aid today. “There are concerns that the money will not be available,” said Toby Nangle , who helps oversee 46 billion euros as director of asset-allocation research at Baring Investment Services Ltd. in London. “There are people who are willing to place their own money at risk in anticipation of this thing not going through.” Finance ministers said on April 11 the EU will provide Greece with 30 billion euros of three-year loans at an interest rate of about 5 percent if the nation requests the cash. The International Monetary Fund would provide another 15 billion euros. The agreement came after earlier pledges failed to convince investors that the government is able to narrow a budget deficit that is more than four times the EU’s limit for members. Pimco Not Ready Pacific Investment Management Co., which owns the world’s largest bond fund, said this week it’s not yet ready to buy Greek bonds. BlackRock Inc., the world’s biggest asset manager, said that donor countries need to demonstrate they can withstand a backlash from their citizens. “I don’t think Greece would go as far as waiting to be seen as failing in the market,” Christopher Pryce , a director at Fitch Ratings in London, said yesterday. “They would prefer to go to the EU. It could well be a week or two. I don’t think they could leave it much longer than that.” Fitch cut Greece two levels on April 9 to BBB-, one rung above speculative grade. The yield on Greek two-year notes fell the most on record the day after the aid package was announced before paring more than half that decline the following two days. It rose to 7.83 percent on April 8, the highest since the euro’s debut in 1999, according to Bloomberg generic prices. The yield ended yesterday at 6.99 percent, up 66 basis points on the day. The cost of protecting against a default in Greek debt for five years surged 56 basis points to 436 basis points as of 5:41 p.m. in London yesterday, credit-default swaps showed. That compares with a record closing price of 443.5 on April 8. ‘Legislative Authority’ The German Finance Ministry would seek “legislative authority” on the loans should Greece call for aid, Michael Offer , a spokesman, told reporters in Berlin yesterday. The lower house of parliament “would of course have to endorse such authority,” he said, without saying how long it might take. France, which would be the second-largest aid contributor after Germany, would probably be able to obtain parliamentary approval to raise the funds within a week, Finance Minister Christine Lagarde said on April 13. Ireland will pass legislation on Greek aid within the next couple of months, Finance Minister Brian Lenihan said April 12. “If legislation fails in one parliament you may find time is running out rather quickly,” said David Schnautz , a fixed- income strategist at Commerzbank AG in London. “You don’t have that much time for trial and error.” Prime Minister George Papandreou needs to raise 11.6 billion euros by the end of May to cover maturing debt, with another 20 billion euros required by year-end to pay interest and finance this year’s deficit. The government sold 1.56 billion euros of bills on April 13, paying a yield of 4.85 percent on the one-year securities, up from 2.2 percent at a January auction. Biggest Deficit Greece’s budget deficit was 12.9 percent of gross domestic product in 2009, the government said on March 31, the biggest in the euro’s history. The EU’s limit is 3 percent. Greece must repay investors 8.2 billion euros on April 20 and 8.1 billion euros on May 19, according to data compiled by Bloomberg. It doesn’t need to raise any more money until May, Petros Christodoulou , head of the country’s Public Debt Management Office, said in a March 31 interview with Bloomberg Television. “If I was the Greek government, I would cover the next few months’ requirement with the aid facility,” said Luca Jellinek , a senior rates strategist at ANZ Banking Group Ltd. in London. “That will help compress spreads and they’ll be able to borrow in the market at cheaper rates later in the year. Why would you borrow at over 7 percent when you can borrow at 5 percent?” To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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Greece Sells $2.1 Billion of Debt After Rescue Plan

April 13, 2010

By Anchalee Worrachate April 13 (Bloomberg) — Greece’s auction of Treasury bills drew stronger demand than at a previous sale as yields more than doubled in the first offering of debt since the nation won a pledge of aid from the European Union. The government sold 780 million euros ($1.06 billion) of 26-week bills at a yield of 4.55 percent, attracting bids for 7.67 times the securities offered, the nation’s Public Debt Management Agency said today in Athens. Greece also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times . In January, the 52-week bills were sold to yield 2.2 percent. Euro-region finance ministers and the International Monetary Fund offered the country as much as 45 billion euros in loans two days ago. Greek two-year notes rose for a third day earlier today and the euro gained against the dollar as the lifeline boosted confidence the government will avoid a default . “The result confirms that the package which was put in place on Sunday has enabled Greece to fund itself in the near- term,” said David Owen , chief European financial economist at Jefferies International Ltd. in London. “But the longer-term fundamental issues in terms of where we go from here haven’t changed. Greece has to put its finances in order against the backdrop of an economy that currently is shrinking.” Financing Needs Prime Minister George Papandreou needs to raise 11.6 billion euros by the end of May to cover maturing debt, with another 20 billion euros required by year-end to pay interest and finance this year’s deficit. Last week the government estimated its 2009 budget shortfall to be 12.9 percent of gross domestic product, the biggest in the euro’s history and more than four times the EU’s 3 percent limit. The previous forecast was 12.7 percent. Greece provided an option at today’s auction for investors to buy an extra 30 percent of the bills at an average price, which was used by buyers, raising the amount sold to 1.56 billion euros from the 1.2 billion euros initially earmarked. “Many investors used the 30 percent option, which is a good signal,” said Luca Cazzulani , a fixed-income strategist at UniCredit SpA, one of the 22 primary dealers of Greek debt. Selling short-term bills “is not the issue,” said Stuart Thomson , who helps oversee more than $100 billion as chief market economist at Ignis Asset Management in Glasgow, Scotland. “It’s whether they can sell medium-term paper and whether they can sell enough of it. Greece will eventually be forced into a partial default.” Yield Spread Yields on Greek bonds rose last week as confidence in the nation’s assets withered. The extra yield investors demand to hold the country’s 10-year bonds instead of German bunds, the region’s benchmark government securities, climbed to 442 basis points on April 8, the highest since 1998. The Greek-German spread averaged about 65 basis points, or 0.65 percentage point, in the five years through November, before concern deepened that the nation’s deficit would soar. Deteriorating sentiment toward Greek debt led to the lowest demand in a year at 26- and 52-week bill sales in January, when the Public Debt Management Agency raised 3.7 billion euros from the auctions, which included a 13-week security. January Demand The 26-week bill drew bids for 4.9 times the amount offered on Jan. 12, compared with an average bid-to-cover of 6.2 times in 2009, according to data compiled by Bloomberg. The ratio at the 52-week sale was 3.1 times in January, below last year’s average of 5 times, the data showed. Demand for the 13-week bills was also less than the average in 2009. The 52-week bills were sold at a yield of 2.2 percent at the January auction, compared with an average of 1.62 percent in the previous four auctions in 2009. The 26-week securities were issued to yield 1.38 percent in January, against an average of 1.36 percent. “I don’t think you can fairly compare yields at this auction and the one in January and say this was a bad auction,” said Wilson Chin , a fixed-income strategist at ING Groep NV in Amsterdam. “Borrowing costs have surged since.” Euro-region finance ministers said on April 11 they would offer Greece as much as 30 billion euros in three-year loans in 2010 at about 5 percent. Another 15 billion euros would be provided by the IMF. Euro Test With the euro facing the stiffest test since its 1999 debut, the 16-nation bloc maneuvered around rules barring the bailout of debt-burdened countries, aiming to prevent Greece’s financial plight from spreading to other members and to mute concerns about the currency’s viability. The euro weakened almost 5 percent versus the dollar this year. Gains for Greek bonds today drove the yield on the two-year security as much as 45 basis points lower to 5.84 percent, before paring the decline to 6.30 percent. The yield tumbled 41 basis points to 6.80 percent yesterday after the rescue package was announced. Concern that Greece’s credit rating remains vulnerable may have restrained demand at the bill sale, said Ciaran O’Hagan , a fixed-income strategist in Paris at Societe Generale SA, another primary dealer for Greek debt sales. Fitch Ratings cut Greece’s debt on April 9 to BBB-, its lowest investment grade, with a “negative” outlook, meaning the company is more likely to cut its classification than leave it unchanged or raise it. Standard & Poor’s and Moody’s Investors Service also have “negative” outlooks on the debt. “Greece’s new Fitch rating is a negative for this auction, and indeed for all Greek debt holders,” O’Hagan said. To contact the reporter on this story: Anchalee Worrachate at aworrachate@bloomberg.net

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Greece Sells More Bills Than Planned as EU’s Bailout Promise Stokes Demand

April 13, 2010

By Anchalee Worrachate April 13 (Bloomberg) — Greece’s auction of Treasury bills drew stronger demand than at a previous sale, signaling renewed investor appetite at the government’s first offering of debt since winning an aid package from the European Union. Greece sold 780 million euros ($1.06 billion) of 26-week bills at a yield of 4.55 percent, with bids for 7.67 times the securities offered, the nation’s debt agency said today in Athens. It also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times. The Public Debt Management Agency said last week it had planned to sell a combined 1.2 billion euros of the bills. Euro-region finance ministers and the International Monetary Fund offered the country as much as 45 billion euros in loans two days ago. The nation’s bonds rose for a third day as the lifeline boosted confidence the government will honor its debt payments. “The auction went well and that’s a reflection of the fact that the rescue package restored investor confidence,” said David Keeble , head of fixed-income strategy at Credit Agricole Corporate and Investment Bank in London. “Greece remains an indebted country, and it needs time to put its house in order. The market wasn’t providing that. Now it has time and breathing space.” Prime Minister George Papandreou needs to raise 11.6 billion euros by the end of May to cover maturing debt, with another 20 billion euros required by year-end to pay interest and finance this year’s deficit. Last week the government estimated its 2009 shortfall to be 12.9 percent of gross domestic product, the biggest in the euro’s history and more than four times the EU’s 3 percent limit. The previous forecast was 12.7 percent. Funding Costs Yields on Greek bonds rose last week as confidence in the nation’s assets withered. The extra yield investors demand to hold the country’s 10-year bonds instead of German bunds, the region’s benchmark government securities, climbed to 442 basis points on April 8, the highest since 1998. The Greek-German spread averaged about 65 basis points, or 0.65 percentage point, in the five years through November, before concern deepened that the nation’s deficit would soar. Deteriorating sentiment toward Greek debt led to the lowest demand in a year at 26- and 52-week bill sales in January. That’s when the Public Debt Management Agency raised 3.7 billion euros from the auctions, which included a 13-week security. The 26-week bill drew bids for 4.9 times the amount of securities offered on Jan. 12, compared with an average bid-to- cover of 6.2 times in 2009, according to data compiled by Bloomberg. The ratio at the 52-week sale was 3.1 times, below last year’s average of 5 times, the data showed. Demand for the 13-week bills was also less than the average in 2009. Rescue Package The 52-week bills were sold at a yield of 2.2 percent at the January auction, compared with an average of 1.62 percent in the previous four auctions in 2009, Bloomberg data showed. The securities yielded 7.48 percent last week. Euro-region finance ministers said on April 11 they would offer Greece as much as 30 billion euros in three-year loans in 2010 at about 5 percent. Another 15 billion euros would be provided by the IMF. With the euro facing the stiffest test since its 1999 debut, the 16-nation bloc maneuvered around rules barring the bailout of debt-plagued countries, aiming to prevent Greece’s financial plight from spreading to other members and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates. The yield on the 10-year Greek bond fell 11 basis points to 6.69 percent as of 10:28 a.m. in London. It tumbled 41 basis points to 6.80 percent yesterday as bond prices surged in response to the rescue package. Fitch Downgrade Concern that Greece’s credit rating remains vulnerable may have restrained demand at the bill sale, said Ciaran O’Hagan , a fixed-income strategist in Paris at Societe Generale SA, another primary dealer for Greek debt sales. Fitch Ratings cut Greece’s debt on April 9 to BBB-, its lowest investment grade, with a “negative” outlook, meaning the company is more likely to cut its classification than leave it unchanged or raise it. Standard & Poor’s and Moody’s Investors Service also have “negative” outlooks on the debt. “Greece’s new Fitch rating is a negative for this auction, and indeed for all Greek debt holders,” said O’Hagan before the auction. “But given the amount is relatively small, it should be well-absorbed. The package is positive for sentiment.” The EU-IMF rescue package may not translate into lower funding costs at Greek debt sales anytime soon, Francesco Garzarelli , chief interest-rate strategist at Goldman Sachs Group Inc. in London, another primary dealer, wrote yesterday in an e-mailed report. “We do not think that Greek market-funding terms will decline all the way to the ones now on offer by the support package in light of pending issues on conditionality, availability and drawdown terms,” Garzarelli wrote in an e- mailed note. “Medium-term debt sustainability also remains an area of focus.” To contact the reporter on this story: Anchalee Worrachate at aworrachate@bloomberg.net

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Greek Debt Investor Demand May Rebound at Auction on `Zero’ Default Risk

April 12, 2010

By Anchalee Worrachate April 13 (Bloomberg) — Demand for Greece’s debt may recover as the government sells 1.2 billion euros ($1.6 billion) of Treasury bills in its first offering since winning an aid package from the European Union. Greece will auction 26- and 52-week bills today as it seeks to fund the EU’s biggest budget deficit. Euro-region finance ministers and the International Monetary Fund offered the country as much as 45 billion euros in loans two days ago. The nation’s bonds jumped yesterday as the lifeline boosted confidence the government will honor its debt payments. “The rescue package means the default risk over the next 12 months is now close to zero,” said Kornelius Purps , a fixed- income strategist in Munich at UniCredit SpA, one of 22 financial institutions that deal directly with Greece’s debt agency. “This wasn’t the case last week. I can imagine that demand will be closer to the stronger levels we saw last year. I wouldn’t be surprised if Greece raises much more than initially planned.” Prime Minister George Papandreou needs to raise 11.6 billion euros by the end of May to cover maturing debt, with another 20 billion euros required by year-end to pay interest and finance this year’s deficit. Last week the government estimated its 2009 shortfall to be 12.9 percent of gross domestic product, the biggest in the euro’s history and more than four times the EU’s 3 percent limit. The previous forecast was 12.7 percent. Demand Slumps Yields on Greek bonds rose last week as confidence in the nation’s assets withered. The extra yield investors demand to hold the country’s 10-year bonds instead of German bunds, the region’s benchmark government securities, climbed to 442 basis points on April 8, the highest since 1998. The Greek-German spread averaged about 65 basis points, or 0.65 percentage point, in the five years through November, before concern deepened that the nation’s deficit would soar. Deteriorating sentiment toward Greek debt led to the lowest demand in a year at 26- and 52-week bill sales in January. That’s when the Public Debt Management Agency raised 3.7 billion euros from the auctions, which included a 13-week security. The 26-week bill drew bids for 4.9 times the amount of securities offered on Jan. 12, compared with an average bid-to- cover of 6.2 times in 2009, according to data compiled by Bloomberg. The ratio at the 52-week sale was 3.1 times, below last year’s average of 5 times, the data showed. Demand for the 13-week bills was also less than the average in 2009. Rescue Package The 52-week bills were sold at a yield of 2.2 percent at the January auction, compared with an average of 1.62 percent in the previous four auctions, Bloomberg data showed. The securities yielded 7.48 percent last week. Euro-region finance ministers said on April 11 they would offer Greece as much as 30 billion euros in three-year loans in 2010 at about 5 percent. Another 15 billion euros would be provided by the IMF. With the euro facing the stiffest test since its 1999 debut, the 16-nation bloc maneuvered around rules barring the bailout of debt-plagued countries, aiming to prevent Greece’s financial plight from spreading to other members and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates. The yield on the 10-year Greek bond tumbled 41 basis points to 6.80 percent yesterday as bond prices rose, and the two-year note yield sank 87 basis points to 6.29 percent. Fitch Downgrade Concern that Greece’s credit rating remains vulnerable may restrain demand at the bill sale, said Ciaran O’Hagan , a fixed- income strategist in Paris at Societe Generale SA, another primary dealer for Greek debt sales. Fitch Ratings cut Greece’s debt on April 9 to BBB-, its lowest investment grade, with a “negative” outlook, meaning the company is more likely to cut its classification than leave it unchanged or raise it. Standard & Poor’s and Moody’s Investors Service also have “negative” outlooks on the debt. “Greece’s new Fitch rating is a negative for this auction, and indeed for all Greek debt holders,” said O’Hagan. “But given the amount is relatively small, it should be well- absorbed. The package is positive for sentiment.” The EU-IMF rescue package may not translate into lower funding costs at Greek debt sales anytime soon, Francesco Garzarelli , chief interest-rate strategist at Goldman Sachs Group Inc. in London, another primary dealer, wrote yesterday in an e-mailed report. “We do not think that Greek market-funding terms will decline all the way to the ones now on offer by the support package in light of pending issues on conditionality, availability and drawdown terms,” Garzarelli wrote in an e- mailed note. “Medium-term debt sustainability also remains an area of focus.” To contact the reporter on this story: Anchalee Worrachate at aworrachate@bloomberg.net

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Greek Aid Package Will Do Little to Boost Economic Growth, Economists Say

April 12, 2010

By Jonathan Stearns April 12 (Bloomberg) — Greece’s rescue package from the European Union will do little to bolster economic growth even as it staves off the immediate risk of default, said economists at Goldman Sachs Group Inc., HSBC Holdings Plc and Morgan Stanley. Euro-region finance ministers yesterday offered Greece as much as 30 billion euros ($41 billion) in loans at a rate of around 5 percent as the government cuts wages and spending to tackle the EU’s largest budget deficit. Another 15 billion euros in aid would come from the International Monetary Fund. “The real issue will be whether Greece can regenerate growth while cutting the fiscal deficit,” Erik Nielsen , London- based chief European economist at Goldman, said in an e-mailed note. “Without growth, the debt is only sustainable if someone will finance them at much less than 5 percent” for at least the next decade. “The exact interest rate charged on the bailout package is a bit of a red herring.” The Greek economy, which contracted 2 percent in 2009, risks being dragged down by government austerity measures that have already sparked a wave of protests in Athens. Even after this year’s measures, which also include tax increases, Greece will have a budget gap of 8.7 percent of gross domestic product. The economy could contract as much as 4 percent this year, the most in more than three decades, Deutsche Bank AG estimates. Yesterday’s EU aid offer was meant as a reward for the austerity efforts and as a tool to enable Greece to keep selling bonds on the market after Greek borrowing costs surged to an 11-year high least week. Massive Fix “It may certainly reduce the possibility of default on a near-term basis,” said Morgan Stanley Asia Ltd. Chairman Stephen Roach in an interview on Bloomberg Radio today. “But you have to ask yourself: how the heck is Greece going to do the massive fiscal adjustment they have supposedly agreed to in a short period of time when they get these funds?” Greece last week raised its estimate of the 2009 deficit from 12.7 percent of GDP to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent ceiling. While rules foresee fines for nations that exceed the limit, no penalty has ever been imposed. Greece’s goal of reducing the deficit by four percentage points this year is part of a plan to bring the budget gap within the EU limit by the end of 2012. ‘Much Tougher’ “Lowering the deficit towards 3 percent of GDP in the subsequent three years will be much tougher and the markets will require much more convincing along the way,” said Janet Henry , chief European economist at HSBC in London, in a research note. Greek bonds jumped today in response to the rescue package, pushing down the two-year yield to 5.807 percent from 7.158 percent on April 9. The 10-year yield dropped 55 basis points to 6.66 percent. The EU-IMF aid offer of as much as 45 billion euros is for 2010. The package, unprecedented in the 11-year history of European economic and monetary union, covers three years and leaves open the sums of possible aid in 2011 and 2012. Greek, EU and IMF officials were due to meet today to start working on details. Some economists said that the Greek rescue plan may encourage others to slow deficit-cutting plans. Paul Mortimer- Lee , head of market economics at BNP Paribas in London, said Europe was engaged in a “game of fiscal chicken” over Greece. ‘Tough Choices’ “It was the eurogroup who swerved to avoid the crash,” he said in an e-mailed note today. “The Greek decision has introduced, or increased, the incentive for governments to avoid tough choices and to let their finances drift or not to try hard enough to consolidate.” Mortimer-Lee pointed to the implications of the agreement for Portugal, which wants to cut its deficit from 9.3 percent of GDP last year to 2.8 percent in 2013. The EU should consider putting in place a “pre-emptive” aid package for Portugal, Simon Johnson , a former IMF chief economist, said in a Bloomberg Television interview today. For Johnson, who is now a professor of finance at MIT Sloan School of Management, the plan increases the risk of “moral hazard” in Europe. “This is not fixing the issue,” he said. “The Greeks could seize the opportunity. You have taken away their incentive to solve the problem.” Greece will probably have to tap the loan package to meet debt payments in May, said Goldman’s Nielsen and HSBC’s Henry. Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds. A total of 8.5 billion euros of Greek 10-year bonds matures on May 19. “The impending redemption hump on May 19 makes it extremely likely that Greece will also have to draw on EMU-IMF loans,” Henry said. Nielsen said: “We continue to think that such official money will indeed be needed to get them through May.” To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

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The area’s officials step in to salvage confidence and pledge 45 billion euros for Greek aid

April 12, 2010

The area’s officials step in to salvage confidence and pledge 45 billion euros for Greek aid

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European stocks fluctuate despite Greece provided with 45 billion euros

April 12, 2010

European stocks fluctuate despite Greece provided with 45 billion euros

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Euro Rises After Greece Wins $61 Billion Aid Pledge From IMF, Governments

April 11, 2010

By Candice Zachariahs and Ben Levisohn April 12 (Bloomberg) — The euro climbed for a third day, its longest winning run in a month, after European governments offered Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates to try and end its fiscal crisis and restore confidence in the currency. Australia’s dollar touched the highest since November versus the greenback after the aid pledge calmed investor fears of a default by Greece, reviving demand for riskier assets. The euro last week dropped to within one cent of an 11-month low against the dollar as rising yields on Greek debt fueled speculation the nation would default, curbing investor appetite for the European currency. “The deal takes out the uncertainty and provides a backstop as far as Greek funding goes in the short term,” said Alex Sinton , a senior dealer at ANZ National Bank Ltd. in Auckland. “This won’t be the end of the euro’s worries but it might be enough to squeeze out a few more shorts.” A short position is a bet that an asset will decline in value. The euro gained 0.9 percent to $1.3617 as of 7:06 a.m. in Tokyo after jumping 1 percent on April 9. It climbed 0.7 percent to 126.66 yen. Last week, the euro traded at $1.3283, less than one cent above $1.3268, the lowest level since May 7, 2009. Australia’s dollar traded at 93.64 U.S. cents after touching 93.89 cents, the most since Nov. 16. Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three-year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund. ‘Big Levels’ The euro is near “big levels” and may rise toward $1.3724, Sinton said. “This is a step of clarification that markets are waiting for — it shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the ministers’ conference call. “The initiative for activating the mechanism rests with the Greek government.” With the euro facing the sternest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates. To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net ;

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Greece Wins $61 Billion Loan Pledge From Euro States to Restore Confidence

April 11, 2010

By James G. Neuger and Jonathan Stearns April 12 (Bloomberg) — European governments offered debt- plagued Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates in a bid to stem its fiscal crisis and restore confidence in the euro. Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said yesterday they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three- year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund. “This is a huge amount,” said Stephen Jen , managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run the market is short Greek assets so we’ll get a rally in those.” With the euro facing the stiffest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates. No Aid Request The euro has dropped 5.7 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management. The single currency rose in Asian trading to $1.3634 from $1.35 on April 9. Bond investors’ response will determine whether Greece needs to tap the aid, a Greek Finance Ministry official said in Athens yesterday. Finance Minister George Papaconstantinou said the government plans to go ahead with debt sales, including a dollar-denominated bond, without taking up the offer for aid. The package “sends a clear message that nobody can play with our common currency and our common fate,” Greek Prime Minister George Papandreou told reporters in Larnaca, Cyprus. Yesterday’s teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet , left open just how much Greece might need in 2011 and 2012, the final years covered by the package. “It shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels yesterday after chairing the conference call. “The initiative for activating the mechanism rests with the Greek government.” IMF Loan Europe’s contribution would represent about two thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said. “We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet today to start working on details. The IMF was “ready to join the effort,” Managing Director Dominique Strauss-Kahn said an in e-mailed statement, without giving more details on the IMF contribution. European rhetorical support in February and March failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills. The jump in Greek yields to the highest since December 1998 helped overcome resistance to an aid package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share. Germany Backs Down Germany “has lost the competition,” said Carsten Brzeski , an economist at ING Group in Brussels who used to work at the European Commission . “All that fuss and talk about not putting taxpayer money at risk has been made obsolete.” The premium investors demand to buy Greek 10-year bonds instead of German bunds jumped to 442 basis points April 8, easing to 398 basis points the next day as speculation over a rescue gained steam. In the compromise hammered out yesterday, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to subsidizing a country that lived beyond its means. The EU will offer a mix of fixed- rate and floating rate loans. The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB. Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit. Deficit Limits While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits. While all euro-region governments vowed to contribute, some would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement. The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9. A combination of higher taxes, lower spending and salary cuts for public workers have prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages. Maturing Debt The EU showed no sign of demanding further Greek austerity measures. Rehn hailed the Greek government for implementing “a very bold and ambitious program.” Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit. The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence. Greece is likely to need money by the end of April, said Erik Nielsen , London-based chief European economist at Goldman Sachs Group Inc. Noting that the budget cuts threaten to cripple the economy, he said in a research note that “this thing is unlikely to go to bed anytime soon.” To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Jonathan Stearns in Brussels at jstearns2@bloomberg.net ;

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Greece Wins EU45 Billion Aid Pledge to Blunt Crisis

April 11, 2010

By James G. Neuger and Jonathan Stearns April 11 (Bloomberg) — European governments offered debt- burdened Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end its fiscal crisis and restore confidence in the euro. Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three-year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund. “This is a step of clarification that markets are waiting for — it shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels today after chairing the ministers’ conference call. “The initiative for activating the mechanism rests with the Greek government.” With the euro facing the sternest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates. Nuclear The euro has dropped 5.7 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management. It now buys $1.35. “This is a huge amount,” said Stephen Jen , managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run the market is short Greek assets so we’ll get a rally in those.” A Greek finance ministry official said today that market reaction to the aid package over the next few days will determine future developments. While Finance Minister George Papaconstantinou welcomed the announcement, he said the government wasn’t requesting the bailout and planned to go ahead with planned debt sales. Greek officials plan a roadshow to U.S. investors this month before selling a dollar-denominated bond. The teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet , left open was how much Greece might need in 2011 and 2012, the final years covered by today’s decision. Aid will flow to the Greeks “when they ask for it,” Cypriot Finance Minister Charilaos Stavrakis told reporters in Nicosia. “The decision was unanimous.” IMF Loan European governments would put up about two thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said. “We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet tomorrow to discuss details. European pledges in February and March to provide aid in an emergency failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Greek Prime Minister George Papandreou’s government will be swamped by its bills. The jump in Greek yields to the highest since December 1998 helped overcome resistance to a loan package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share. The premium investors demand to buy Greek 10-year bonds instead of German bunds jumped to 442 basis points April 8, easing to 398 basis points the next day as speculation over a rescue gained steam. Euribor Link In the compromise hammered out today, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to granting a subsidy to a country that failed to live within its means. The EU will offer a mix of fixed-rate and floating rate loans. The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB. Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit. While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits. New Laws While all euro-region governments promised to contribute, some like Ireland would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement. The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9. A combination of higher taxes, lower spending and salary cuts for public workers have prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages. The EU showed no sign of setting tougher conditions today. Rehn hailed the Greek government for implementing “a very bold and ambitious program.” Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit. The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence in today’s pledge. A global bond in dollars will be sold in the next two months, Petros Christodoulou , Greece’s debt-management head, said on March 31. To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Jonathan Stearns in Brussels at jstearns2@bloomberg.net ;

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Greece Offered $61 Billion Standby Loans by Euro States at Rates Around 5%

April 11, 2010

By James G. Neuger and Jonathan Stearns April 11 (Bloomberg) — European governments offered debt- burdened Greece a rescue package worth as much as 45 billion euros ($61 billion) at below-market interest rates as they try to end its fiscal crisis and restore confidence in the euro. Forced into action by a surge in Greek borrowing costs to an 11-year high, euro-region finance ministers said they would offer as much as 30 billion euros in three-year loans in 2010 at around 5 percent. That’s less than the current three-year Greek bond yield of 6.98 percent. Another 15 billion euros would come from the International Monetary Fund. “This is a step of clarification that markets are waiting for — it shows there is money behind this,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels today after chairing the ministers’ conference call. “The initiative for activating the mechanism rests with the Greek government.” With the euro facing the sternest test since its debut in 1999, the 16-nation bloc maneuvered around rules barring the bailout of debt-stricken countries, aiming to prevent Greece’s financial plight from spreading and to mute concerns about the currency’s viability. Germany also abandoned an earlier demand that Greece pay market rates. Nuclear The euro has dropped 5.7 percent against the dollar this year as the discord within Europe over the response to the Greek crisis sapped faith in Europe’s economic management. It now buys $1.35. “This is a huge amount,” said Stephen Jen , managing director at BlueGold Capital Management LLP in London and a former IMF economist. “This is more than a bazooka. They have gone nuclear on the issue of Greece. In the short run the market is short Greek assets so we’ll get a rally in those.” A Greek finance ministry official said today that market reaction to the aid package over the next few days will determine future developments. While Finance Minister George Papaconstantinou welcomed the announcement, he said the government wasn’t requesting the bailout and planned to go ahead with planned debt sales. Greek officials plan a roadshow to U.S. investors this month before selling a dollar-denominated bond. The teleconference of euro-region officials, which included European Central Bank President Jean-Claude Trichet , left open was how much Greece might need in 2011 and 2012, the final years covered by today’s decision. Aid will flow to the Greeks “when they ask for it,” Cypriot Finance Minister Charilaos Stavrakis told reporters in Nicosia. “The decision was unanimous.” IMF Loan European governments would put up about two thirds of any aid, with the IMF chipping in the rest, European Union Economic and Monetary Commissioner Olli Rehn said. “We cannot speak on behalf of the IMF, but we know that they are ready to cooperate and contribute with a substantial amount,” Rehn said. Greek, EU and IMF officials will meet tomorrow to discuss details. European pledges in February and March to provide aid in an emergency failed to prevent Greek 10-year bond yields from soaring to 7.51 percent on April 8, according to Bloomberg generic prices, amid concern that Papandreou’s government will be swamped by its bills. The jump in Greek yields to the highest since December 1998 helped overcome resistance to a loan package in Germany, which as Europe’s biggest economy would contribute almost a third of the loans, the largest single share. The premium investors demand to buy Greek 10-year bonds instead of German bunds jumped to 442 basis points April 8, easing to 398 basis points the next day as speculation over a rescue gained steam. Euribor Link In the compromise hammered out today, the European loans would be tied to Euribor and priced above rates charged by the IMF, a nod to German opposition to granting a subsidy to a country that failed to live within its means. The EU will offer a mix of fixed-rate and floating rate loans. The IMF would charge less than the EU. Both types of funding would be offered at the same time, Rehn said. Transfers to Greece would be made by the ECB. Greece last week raised its estimate of the 2009 deficit from 12.7 percent of gross domestic product to 12.9 percent, the highest in the euro’s history and more than four times the EU’s 3 percent limit. While rules dictated by Germany in the 1990s foresee fines for countries that go over the limit, no penalty has ever been imposed. Germany also led the charge to loosen the rules in 2005 after three years of excessive deficits. New Laws While all euro-region governments promised to contribute, some like Ireland would need parliamentary approval. Ireland, itself reeling from the financial crisis, would require “national legislation,” Finance Minister Brian Lenihan said in an e-mailed statement. The Greek government has yet to request a European lifeline, confident that this year’s planned budget cut of 4 percentage points will stem speculation that it is heading for the euro region’s first-ever default. Fitch Ratings highlighted that risk by shaving Greece’s debt rating to BBB-, one level above junk, on April 9. A combination of higher taxes, lower spending and salary cuts for public workers have prompted strikes and protests against Papandreou, a socialist elected in October on promises of raising wages. The EU showed no sign of setting tougher conditions today. Rehn hailed the Greek government for implementing “a very bold and ambitious program.” Greece needs to raise 11.6 billion euros by the end of May to cover maturing bonds, and another 20 billion euros by the end of the year to pay debt coupons and finance this year’s deficit. The debt agency plans to offer 1.2 billion euros of six- month and one-year notes tomorrow, in a test of investor confidence in today’s pledge. A global bond in dollars will be sold in the next two months, Petros Christodoulou , Greece’s debt-management head, said on March 31. To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Jonathan Stearns in Brussels at jstearns2@bloomberg.net ;

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Germany Said to Accept EU Loan Compromise for Greece

April 11, 2010

By John Fraher and Brian Parkin April 11 (Bloomberg) — Germany is prepared to give Greece loans at below-market interest rates, dropping its opposition to subsidies as European finance ministers meet to discuss the terms of a lifeline for the debt-stricken nation, a European government official said. The loans would be priced above the rate charged by the International Monetary Fund, which would also participate in a European Union-led rescue, said the person, who spoke on condition of anonymity. Such an arrangement would satisfy German demands that Greece shouldn’t be given subsidized loans, the person said. Greece may receive loans for between 20 billion euros ($27 billion) and 25 billion euros at a rate of about 5 percent, Die Welt reported today, without citing anyone. German resistance to subsidized loans threatened to hold up efforts to agree on a rescue package for Greece, whose bonds plunged last week. With German Chancellor Angela Merkel balking at the use of taxpayers’ funds, her government has said that the EU should stick to a March 25 agreement that credit to Greece should be at “non-concessional” rates. “They have to be given some help from Europe or the IMF at concessional rates,” billionaire investors George Soros said in an April 9 interview on Bloomberg Radio in Cambridge, England. “It is a make or break time for the euro and it’s a question whether the political will to hold Europe together is there or not.” Terms of Agreement The European Commission said in an e-mailed statement that there will be a news conference today in Brussels at about 4 p.m. local time, following a teleconference of eurogroup finance ministers. The eurogroup also includes European Central Bank President Jean-Claude Trichet . Ministers may today agree to the formula for calculating the loans, the European government official said. Under the terms of the March accord, Europe would provide more than half the loans and the IMF the rest, which would be triggered if Greece runs out of fund-raising options. UBS AG economists estimate Greece will need to seek emergency funding to make bond payments and cover debt refinancing of more than 20 billion euros in the next two months. The yield on Greek 10-year bonds surged 60 basis points this past week, driving it to a record 7.364 percent on April 8. Any IMF loans to Greece may cost around 3.26 percent. The premium investors demand to buy Greek 10-year bonds instead of German bunds jumped to 442 basis points April 8, before sliding to 398 basis points a day later. The euro, which has dropped about 6 percent against the dollar this year, rose 1 percent to $1.35 on April 9 as speculation about an aid package mounted. German Resistance Overcoming German resistance to subsidized loans came amid mounting speculation that that a bailout was imminent. UBS said it could come this weekend after Fitch Ratings cut Greece’s debt rating to BBB-, just one level above junk. Greek Prime Minister George Papandreou has argued that he needed below-market borrowing costs to cut EU’s-biggest budget deficit. Greek Finance Minister George Papaconstantinou said April 9 that Greece isn’t seeking EU aid and would meet its goal of cutting the deficit from about 13 percent last year, more than 4 times the EU limit, to 8.7 percent this year. Greece needs to raise 11.6 billion euros to cover debt that is maturing before the end of May and plans to sell bonds to U.S. investors in the coming weeks. The country’s debt agency plans to offer 1.2 billion euros of six-month and one-year notes tomorrow. Confidence ‘Undermined’ Greece’s long-term foreign and local currency issuer default ratings were on April 9 cut two levels to BBB-, the same level as Bulgaria and Panama, from BBB+ by Fitch Ratings. The outlook is negative, Fitch said, citing delays in agreeing to an aid package. “The lack of clarity regarding the mechanism for timely external financial support may have hindered Greece’s access to market finance at affordable cost and hence further undermined confidence in the capacity of the government to meet its fiscal targets,” Fitch said in an e-mailed statement. The Athens benchmark stock index rose for the first day in four on April 9 amid speculation that an aid package would soon be agreed. It fell 5 percent this week. EU leaders, including French President Nicolas Sarkozy and Herman Van Rompuy , president of the 27-nation bloc, expressed their readiness to provide aid two days ago. “A support plan has been agreed and we are ready to activate at any moment to come to the aid of Greece,” Sarkozy said. To contact the reporters on this story: John Fraher in London at jfraher@bloomberg.net ; Brian Parkin in Berlin at bparkin@bloomberg.net

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Greek Bank Credit Ratings Cut by Fitch After Nation’s Sovereign Downgrade

April 9, 2010

By Christine Harper April 9 (Bloomberg) — National Bank of Greece SA and four other Greek lenders had their credit grades slashed today by Fitch Ratings after the credit firm downgraded their home nation’s sovereign rating. The changes “reflect Greek banks’ debilitated risk profile, particularly regarding their liquidity and funding position as a result of increased sovereign concerns,” Fitch said in a statement. “The banks will be challenged to maintain their present liquidity profile given current market volatility.” Fitch, one of the three biggest credit rating firms, lowered its assessment of Greece’s creditworthiness earlier in the day by two notches to the lowest investment grade and said the outlook remains negative. European Union officials responded by saying they are ready to rescue Greece if needed. Ratings on National Bank of Greece, the nation’s largest, along with EFG Eurobank Ergasias , Alpha Bank A.E. and Piraeus Bank SA were reduced by one notch to BBB-, the lowest investment-grade rating, and Fitch said the outlook remains negative. Agricultural Bank of Greece ’s long-term rating was cut to BB+, the highest junk rating, from BBB- and was also placed on rating watch negative. The banks’ deposits have declined by 2 percent to 4 percent in the three months that ended in March amid “elevated risk perception” surrounding Greece, Fitch said. The support rating floors on the five banks was also lowered to BB from BBB- as Fitch decided that the prospect of government help is more remote. Government Support “While in Fitch’s opinion the Greek government’s propensity to support banks remains, its ability to support them has been markedly reduced,” Fitch wrote. “Its ability to provide significant levels of support is itself likely to be dependent on the external provision of support” from the euro area and the International Monetary Fund. As of the end of December, the five banks had total assets of about 350 billion euros ($472 billion), according to data compiled by Bloomberg. National Bank of Greece, had 113.4 billion euros in total assets . To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

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Greece’s Dollar Bond Yield Unattractive Even Over 7%, Pimco’s Clarida Says

April 8, 2010

By Ben Levisohn April 8 (Bloomberg) — Greece’s dollar bonds would be unappealing even if they returned more than 7 percent, according to Richard Clarida , global strategic adviser at Pacific Investment Management Co. “I don’t think that it would be an attractive enough yield,” said Clarida today in a Bloomberg Radio interview with Tom Keene . Greece is “sort of like the Titanic. Eighteen things went wrong, and when they go wrong at once it’s problematic,” said Clarida, whose Newport Beach, California-based firm runs the world’s largest mutual fund. Greece plans to sell a global bond in dollars in the next two months as part of a plan to raise 11.6 billion euros ($15.4 billion) in funding by the end of May after investors lost money on its most recent sale. The nation needs to borrow a total of 32 billion euros this year, Petros Christodoulou , director general of the Public Debt Management Agency, said in a Bloomberg Television interview on March 31. He declined to say how big the dollar issue might be. “We’re talking now about what the market sees as a solvency issue,” Clarida said. Greece is struggling to cut its budget deficit, the largest in Europe, from 12.7 percent of gross domestic product, prompting investors to dump Greek assets. Finance Minister George Papaconstantinou told ANT1 television that Greece doesn’t need additional austerity measures after the European Union and the International Monetary Fund agreed to terms for an emergency support package. ‘Not a Lot’ “The size of the packages being discussed now, though big by IMF standards, may not be enough for Greek refinancing needs,” Clarida said. “Compared to the amount of debt Greece has to roll over, it’s not a lot of money.” The IMF may provide 15 billion to 20 billion euros, wrote Barclays Plc economists Christian Keller in London and Laurence Boone in Paris in a note to investors yesterday, citing the “recent pattern of IMF lending in European Union programs.” A joint rescue package for Greece by euro-region countries and the IMF may total at least 40 billion euros over three years, the Barclays economists wrote. The yield on the 10-year Greek bond increased 0.26 percentage point to 7.42 percent today, increasing the spread with benchmark German bunds to the widest since the euro’s debut in 1999. Greece’s ASE Index of stocks slid as much as 5.2 percent, the most in almost four months, and the cost of insuring against a default by the nation climbed to a record. To contact the reporter on this story: Ben Levisohn in New York at blevisohn@bloomberg.net

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France Telecom May Invest Up to $9.3 Billion on Africa, Middle East Deals

April 8, 2010

By Matthew Campbell April 8 (Bloomberg) — France Telecom SA may invest as much as 7 billion euros ($9.3 billion) in deals focused on Africa and the Middle East in the next five years, Chief Executive Officer Stephane Richard said. The investment would be part of a plan to double revenue from emerging markets, Richard said in an interview in Paris yesterday. Emerging markets currently account for about 3.3 billion euros of revenue at France’s largest phone company, or about 7 percent of total sales of about 46 billion euros. “If we can buy a portfolio of assets to arrive more rapidly, that’s very good,” Richard said. “If it’s necessary to buy licenses country by country, that works also.” Some of the world’s biggest mobile-phone operators, including Vodafone Group Plc of the U.K., are looking for growth in Africa as revenue gains from their home markets slow. Last month, India’s Bharti Airtel Ltd . agreed to buy assets in 15 African countries from Zain , Kuwait’s largest operator, for $9 billion. “A doubling of activity in five years supposes that we find 2 billion euros more in revenue,” through new licenses or asset acquisitions, with another billion euros coming from internal growth by the end of the period, Richard said. For the acquisitions, paying multiples similar to the transaction between Zain and Bharti would be about 2.5 times or even three times revenue, he said. “Therefore we have about five or six billion euros, or even seven” billion euros that could be invested, he added. ‘Regional Cluster’ France Telecom fell as much as 1.6 percent in Paris trading, the biggest intraday slide in almost two months. It slid 1.5 percent to 17.31 euros at 11:19 a.m., giving the company a market value of about 46 billion euros. External growth in Africa and the Middle East will come from the purchase of licenses or of assets including some that could cover multiple countries, Richard said. “It’s definitely welcome news for the new CEO to re- iterate that growth outside of France and in Africa is still a priority,” said Michael Kovacocy , an analyst at Daiwa Capital Markets in London. “I would say maybe even more money could be spent in Africa over the medium and long term. If anything, he’s playing it safe.” Richard took over as CEO on March 1, replacing Didier Lombard , who remains the company’s chairman. France Telecom is focused on filling gaps in West Africa, where it has operations in countries including Cameroon, Senegal and Niger, he said. “All of the countries in this zone where we aren’t at present interest us,” Richard said. “There’s logic in having a regional cluster.” Bharti Assets Richard said he would consider any operations Bharti might choose to sell from the portfolio of assets it has just acquired from Zain. “It’s certain we’ll look at it,” Richard said, adding that “the ink on the deal is barely dry, so it’s not the moment for discussions.” France Telecom had free cash flow of 8.3 billion euros at the end of last year. The company also has projected cash flow of 8 billion euros for this year and next and plans to use some of that on acquisitions, Richard said. Africa has a mobile penetration rate of less than 45 percent, presenting opportunities for “tremendous growth” in customer numbers, Informa Telecoms & Media analysts including Nick Jotischky said in a research report. In most European countries the penetration rate is over 100 percent, meaning that the number of SIM cards in circulation is greater than the population. Vivendi SA, whose SFR mobile-phone service is France’s second-largest, is expanding in Africa through its Maroc Telecom unit, while South Africa’s MTN Group Ltd . is the regional market leader. To contact the reporter on this story: Matthew Campbell in Paris via mcampbell39@bloomberg.net .

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Greece Plans Dollar Bond After Euro Sale to Raise $15.6 Billion by May 31

March 31, 2010

By Matthew Brown and David Tweed March 31 (Bloomberg) — Greece plans to sell a global bond in dollars in the next two months to help raise 11.6 billion euros ($15.6 billion) in funding requirements by the end of May after investors lost money on its most recent sale. Greece needs to borrow a total of 32 billion euros this year, including May’s amount, Petros Christodoulou , director general of the Public Debt Management Agency, said today in a Bloomberg Television interview. He declined to say how big the dollar issue might be. Greece last sold dollar bonds in June 2008 when it issued $1.5 billion of five-year notes. Seven-year notes sold by the government this week fell even after the European Union and the International Monetary Fund crafted an aid package that would be triggered should the nation be unable to raise sufficient cash from capital markets to cover its financing needs. Greece may pay about 13 billion euros more in interest on the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank. “A dollar bond sale means that they don’t have to go to the long end of the curve, which they might find tricky, after they’ve sold” five-, seven- and 10-year debt this year, said Charles Diebel , senior fixed-income strategist at Nomura International Plc in London. “They may raise 7 billion euros in a three-year deal, leaving them 4 billion euros to raise in dollars to complete their May funding.” Spread Widening Greek 10-year bonds rose for the first time in three days, erasing earlier declines, pushing the yield down 3 basis points to 6.49 percent as of 1:14 p.m. in London. The extra yield, or spread, that investors demand to hold Greek 10-year bonds instead of benchmark German bunds was little changed at 334 basis points, after widening to 345 basis points. The seven-year notes have fallen 1.75, or 17.5 euros per 1,000-euro face amount, to 97.69 since the sale on March 29, according to Royal Bank of Scotland Group Plc prices on Bloomberg. The notes yield 6.32 percent, compared with 6 percent when the debt was issued on March 29, RBS prices show. “We are doing everything we can from our end to calm the markets down,” Christodoulou said. “We are doing the best we can to fund early, to reduce the uncertainty surrounding our market.” Christodoulou said he wants the nation’s 10-year bonds to yield about 250 basis points over Germany by the end of European summer and a “low 200” basis-point spread to bunds by the fourth quarter. Debt ‘Snowball’ Interest on the three bonds it sold this year, including a seven-year note offered this week, will amount to 7.7 billion euros over the life of the securities, compared with 3.8 billion euros had they sold them at the average extra spread over German debt that prevailed between 2000 and 2008, the data show. Greece will incur a further 18.9 billion euros of interest on this year’s remaining issuance, compared with 9.4 billion euros before the crisis began, according to Bloomberg calculations based on Credit Agricole data. “Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell , a fixed-income strategist at Credit Agricole CIB in London. “The market is currently reflecting disappointment that the seven-year deal didn’t outperform.” ‘Muddle Through’ Greece sold 8 billion euros of five-year notes on Jan. 25 to yield 3.81 percentage points more than benchmark German securities of similar maturity, compared with an average spread of 0.26 percentage points before the crisis. It issued 5 billion euros of 10-year bonds yielding 3.25 percentage points more than German debt on March 4, compared with an average 0.34 percentage point. Credit Agricole predicts that this year Greece will sell 8 billion euros of five-year notes, 4 billion euros of 15-year bonds, 8 billion euros of 10-year securities, 3 billion euros of 30-year bonds and 5 billion euros of five-year floating notes. “We are continuing to muddle our way through the funding hump that Greece has over the next few weeks,” Jim Reid , head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to clients yesterday. “This story will run and run as these levels of funding relative to core Europe aren’t really sustainable.” To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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Greece Plans Dollar Bond After Euro Sale to Make $15.6 Billion by End-May

March 31, 2010

By Matthew Brown and Maryam Nemazee March 31 (Bloomberg) — Greece plans to sell a global bond in dollars in the next two months to help raise 11.6 billion euros ($15.6 billion) in funding requirements by the end of May after investors lost money on its most recent sale. Greece needs to borrow a total of 32 billion euros this year, including May, Petros Christodoulou , director general of the Public Debt Management Agency, said today in a Bloomberg Television interview. He declined to say how big the dollar issue might be. Seven-year notes sold by the government this week fell even after the European Union and the International Monetary Fund crafted an aid package that would be triggered should the nation be unable to raise sufficient cash from capital markets to cover its financing needs. Greece may pay about 13 billion euros more in interest on the debt it sells this year than it would have to had yields stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank. “A dollar bond sale means that they don’t have to go to the long end of the curve after they’ve sold” five-, seven- and 10-year debt this year, said Charles Diebel , senior fixed-income strategist at Nomura International Plc in London. “They may raise 7 billion euros in a three-year deal, leaving them 4 billion euros to raise in dollars to complete their May funding.” Spread Widening Greek bonds fell for a third day, pushing the yield on the two-year note up 17 basis points to 5.22 percent as of 10:26 a.m. in London. The 10-year yield increased 7 basis points to 6.58 percent. The seven-year notes sold on March 29 have fallen 2.3 percent since issue. The extra yield, or spread , that investors demand to hold Greek 10-year bonds instead of benchmark German bunds climbed 12 basis points to 345 basis points, the most since Feb. 25. Christodoulou said he wants the nation’s 10-year bonds to yield about 250 basis points over Germany by the end of European summer and a “low 200” basis-point spread to bunds by the fourth quarter. Interest on the three bonds it sold this year, including a seven-year note offered this week, will amount to 7.7 billion euros over the life of the securities, compared with 3.8 billion euros had they sold them at the average extra spread over German debt that prevailed between 2000 and 2008, the data show. Greece will incur a further 18.9 billion euros of interest on this year’s remaining issuance, compared with 9.4 billion euros before the crisis began, according to Bloomberg calculations based on Credit Agricole data. ‘Snowball’ “Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell , a fixed-income strategist at Credit Agricole in London. “The market is currently reflecting disappointment that the seven-year deal didn’t outperform.” Greece sold 8 billion euros of five-year notes on Jan. 25 to yield 3.81 percentage points more than benchmark German securities of similar maturity, compared with an average spread of 0.26 percentage points before the crisis. It issued 5 billion euros of 10-year bonds yielding 3.25 percentage points more than German debt on March 4, compared with an average 0.34 percentage point. Credit Agricole predicts that this year Greece will sell 8 billion euros of five-year notes, 4 billion euros of 15-year bonds, 8 billion euros of 10-year securities, 3 billion euros of 30-year bonds and 5 billion euros of five-year floating notes. “We are continuing to muddle our way through the funding hump that Greece has over the next few weeks,” Jim Reid , head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to clients yesterday. “This story will run and run as these levels of funding relative to core Europe aren’t really sustainable.” To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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Greek Budget Crisis Adds $17.5 Billion to Interest on Debt Sold This Year

March 31, 2010

By Matthew Brown March 31 (Bloomberg) — Greece may pay about 13 billion euros ($17.5 billion) more in interest on the debt it sells this year than it would have if yields had stayed at their pre-crisis levels relative to Germany’s, according to data compiled by Bloomberg and Credit Agricole Corporate and Investment Bank. Interest on the three bonds it sold this year, including a seven-year note offered this week, will amount to 7.7 billion euros over the life of the securities, compared with 3.8 billion euros if they had sold them at the average extra yield, or spread, over German debt that prevailed between 2000 and 2008, the data show. Greece will incur a further 18.9 billion euros of interest on this year’s remaining issuance, compared with 9.4 billion euros before the crisis began, according to Bloomberg calculations based on Credit Agricole data. Greece is struggling to lower its borrowing costs even after the European Union and the International Monetary Fund crafted an aid package that would be triggered if the nation can’t raise sufficient cash from capital markets to cover its financing needs. Prime Minister George Papandreou ’s government, which is seeking to narrow a budget deficit that is more than four times the EU’s limit, must raise as much as 10.5 billion euros by the end of May. “Greece needs to get through its current funding and start growing at a decent rate so this large amount of debt doesn’t snowball,” said Peter Chatwell , a fixed-income strategist at Credit Agricole in London. “The market is currently reflecting disappointment that the seven-year deal didn’t outperform and Greek spreads are likely to stay where they are for now.” Sale Forecast Greece sold 8 billion euros of five-year notes on Jan. 25 to yield 3.81 percentage points more than benchmark German securities of similar maturity, compared with an average spread of 0.26 percentage points before the crisis. It issued 5 billion euros of 10-year bonds yielding 3.25 percentage points more than German debt on March 4, compared with an average 0.34 percentage points. Credit Agricole predicts that this year Greece will sell 8 billion euros of five-year notes, 4 billion euros of 15-year bonds, 8 billion euros of 10-year securities, 3 billion euros of 30-year bonds and 5 billion euros of five-year floating notes. Dollar Bond Greece plans to sell a global bond priced in dollars in late April or early May after a delegation visits the U.S., Petros Christodoulou , director general of the Public Debt Management Agency, said in a Bloomberg TV interview today. Greece must raise 11.6 billion euros in bonds before the end of May after April funding was “taken care of,” Christodoulou said. He declined to say how big the dollar issue might be. Greece’s seven-year notes fell yesterday on the first day of trading, with the yield rising to 6.078 percent from an issue yield of 6.001 percent. Greek bonds fell for a third straight day, pushing the yield on the two-year note up 14 basis points to 5.19 percent as of 9:13 a.m. in London. The 10-year yield rose 4 basis points to 6.56 percent. “We are continuing to muddle our way through the funding hump that Greece has over the next few weeks,” Jim Reid , head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to clients yesterday. “This story will run and run as these levels of funding relative to core Europe aren’t really sustainable.” To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

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Greek Seven-Year Bond Demand Seen as Gauge to Measure Need for EU Support

March 30, 2010

By Caroline Hyde and Sonja Cheung March 30 (Bloomberg) — Greece’s prospects of raising 35 billion euros ($47 billion) of debt this year to avoid a bailout from the European Union may depend on how investors receive the nation’s seven-year bonds on their first day of trading. Greece’s 5 billion euros of notes fell after the country sold the securities yesterday without offering a yield premium over existing debt. The government got 6 billion euros of orders for the notes, compared with 15 billion euros for the 10-year bonds it issued on March 4, when it offered an extra 32 basis points, bankers involved in the deals said. “The market will be looking to see how this deal performs over the next few days, which is the real test,” said Georg Grodzki , head of credit research at Legal & General Investment Management in London, which oversees more than 300 billion pounds ($449 billion) of assets. “Greece needs to set the stage for its next issue and it won’t be a good signal if the spreads move out on this new seven-year issue.” Prime Minister George Papandreou ’s government must raise as much as 10.5 billion euros by the end of May if it’s to avoid re-igniting the budget crisis that prompted the EU to step in with a rescue plan March 25. Yesterday’s sale was Greece’s first since EU leaders drafted the financial safety net. Greece’s Public Debt Management Agency said in January it needs to raise 53 billion euros of bonds in 2010. It has sold 18 billion euros so far. Bonds Fall The yield on the new notes rose to 6.27 percent as of 4:15 p.m. in London, up from 6 percent when they were issued yesterday, ABN Amro Bank NV prices show. Yields move inversely to bond prices. “The crucial message to the market is that we successfully raised another decent benchmark-size new issue,” Petros Christodoulou , head of the PDMA in Athens, said yesterday in an e-mailed comment. “We have prefunded the whole of April. Once the market digests that, it will realize that our refinancing risk is largely gone.” The new notes stayed lower after Greece’s surprise auction of 5.9 percent bonds maturing October 2022 today attracted demand for less than half the debt on offer. The country’s increase of its existing 12-year issue raised 390 million euros, compared with an upper limit of 1 billion euros, the PDMA said. Greece needs an average of almost 2 billion euros a month to cover the budget gap and interest payments on debt, according to its deficit-reduction plan. The nation is aiming to cut the deficit by 4 percentage points in 2010 from last year’s 12.7 percent of gross domestic product, before satisfying the EU’s 3 percent limit by 2012. Spread ‘Risk’ “We may see the price of the latest bond fall a bit, as there’s still volatility in the market and in general a risk of widening spreads as Greece contends with refinancing existing debt,” Tim Brunne , a credit strategist at UniCredit SpA in Munich, said before the notes started trading. Greece priced the seven-year securities to yield 310 basis points more than the benchmark swap rate, according to data compiled by Bloomberg. The 6 percent yield at issue was the same as on the nation’s existing seven-year notes, according to composite prices on Bloomberg. That compares with 6.44 percent on the 10-year benchmark bonds it issued March 4 and 5.93 percent on five-year notes sold on Jan. 26, Bloomberg data show. A spokesman for ING Groep NV, one of the managers of the bond sale, couldn’t be reached for comment. Bankers from Bank of America Merrill Lynch also weren’t available. A London-based spokesman for Societe Generale SA declined to comment. Alpha Bank AE and Emporiki Bank SA were also hired to manage the transaction. Spain, Portugal While the seven-year bonds didn’t offer a yield premium over existing government debt, Greece paid investors switching out of comparable Spanish or Portuguese securities as much as five times the spread, according to prices on Bloomberg. The yield on the Greek bonds equates to 363 basis points more than benchmark seven-year German securities, compared with 334 basis points when the securities were issued. That compares with 63 basis points for similar-maturity Spanish debt and 115 basis points for Portugal’s bonds, Bloomberg data show. A basis point is 0.01 percentage point. Greece will pay about 570 million euros more in interest over the lifetime of the new bonds than on bonds due July 2017 issued January 2007, according to Bloomberg calculations. ‘Next to No Premium’ “The new issue is offering next to no premium over existing debt and is therefore not a compelling trade,” said Louis Gargour , chief investment officer at hedge fund LNG Capital LLP in London, who didn’t buy the securities. “However, Greece has probably priced it tightly because investors expect that, from here on in, their debt will tighten as a result of expected assistance from IMF and Europe.” EU backing for Greece was “significant” in clarifying the willingness of Greece’s euro-area partners to act as a “lender of last resort” and to support an International Monetary Fund program if required, Fitch Ratings said in a statement yesterday. The IMF will impose conditions on Greece if the debt- stricken euro-region economy asks for assistance, Managing Director Dominique Strauss-Kahn said in an interview. “If, and it’s a big if, Greece asks for support, we will provide support for Greece as one of our members, as we do with any other member,” Strauss-Kahn said. “The IMF will define the conditionality, as we do with any country.” Spread Widens The extra yield investors demand to hold 10-year Greek notes rather than benchmark German bunds has risen 28 basis points since before the bond sale was announced, to 333 basis points. The difference was 239 at the start of this year and as high as 396 in January, compared with an average of about 60 basis points in the past 10 years. The cost of default insurance on Greece’s debt also rose, with credit-default swaps on the nation climbing 20 basis points to 335.5 basis points, according to CMA DataVision prices. The contracts, which pay the buyer face value in exchange for the underlying securities or the cash equivalent in the event of default, rose to 428 basis points on Feb. 4. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year. To contact the reporters on this story: Caroline Hyde in London chyde3@bloomberg.net ; Sonja Cheung in London at scheung58@bloomberg.net

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Ireland’s `Worst Fears Surpassed’ as Bad Bank Leaves $42.7 Billion Hole

March 30, 2010

By Dara Doyle and Colm Heatley March 30 (Bloomberg) — Ireland’s banks may need at least 31.8 billion euros ($42.7 billion) in new capital after a real- estate slump left them crippled by mounting bad loans. The fundraising requirement was announced after the National Asset Management Agency, the country’s so-called bad bank, said it will apply an average discount of 47 percent on the first block of loans it is taking over from lenders and the country’s financial regulator set new capital targets. The discount compares with the government’s initial 30 percent estimate. “Our worst fears have been surpassed,” Finance Minister Brian Lenihan said in the parliament in Dublin today. “The detailed information that has emerged from the banks in the course of the process is truly shocking.” Allied Irish Banks Plc needs to raise 7.4 billion euros, while Bank of Ireland Plc will need 2.66 billion euros. Anglo Irish Bank Corp. , nationalized last year, may need as much 18.3 billion euros, Lenihan said. Lenders must have a core tier 1 capital ratio of 8 percent and an equity core tier 1 capital of 7 percent by the end of 2010, according to the regulator. They must “set out plans to ensure that capital is in place by the end of 2010,” it said. The regulator has given Ireland’s banks 30 days to submit recapitalization plans, which can involve asset sales and the issue of shares. To contact the reporter on this story: Dara Doyle in Dublin at ddoyle1@bloomberg.net ; Colm Heatley in Belfast at cheatley@bloomberg.net

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Enel to Seek Banks This Month to Advise on Green Power IPO, CEO Conti Says

March 19, 2010

By Tommaso Ebhardt and Elisa Martinuzzi March 19 (Bloomberg) — Enel SpA plans to seek banks this month to advise on the initial public offering of its renewable energy unit, likely to be Europe’s largest since 2007. Italy’s biggest utility may invite investment banks to bid to manage the IPO of Enel Green Power as soon as next week, Chief Executive Officer Fulvio Conti said in an interview in London yesterday. Rome-based Enel will select the firms by the end of April to enable the company to sell stock as soon as June, Conti said. “The beauty parade will start soon,” said Conti. “It’s a matter of a week, a week or two.” The sale of as much as 49 percent of the company may raise about 4 billion euros ($5.4 billion) for Enel, analysts said, based on the business’s forecast earnings. That would make Green Power the biggest IPO in Europe since the 4.5 billion-euro sale of Iberdrola Renovables SA . IPOs in Europe have been slower to recover than in the U.S. and Asia where economies have been quicker to return to growth, depriving investment banks of one of the most profitable businesses. “The IPO market still feels weak,” Barclays Capital analysts said yesterday in a note on European investment banks. It would be good for banks and markets “if deals get done.” Enel Green Power manages activities in wind, solar, geothermal, biomass and hydroelectric energy in seventeen countries in Europe and the Americas. The utility is selling assets to reduce debt to 45 billion euros from 51 billion euros. Conti’s Value Enel expects the renewable energy unit to post earnings before interest, tax, depreciation and amortization of 1.4 billion euros in 2011, up from 1.2 billion euros in 2009, the company said yesterday. Conti has said the unit may be valued at as much as 11 or 12 times Ebitda, including debt. Green Power has current capacity of 5.7 gigawatts, which should rise to 9.4 gigawatts by 2014, primarily funded by cash generation, Conti said. The unit’s IPO will take place by “June, September or October depending on market conditions,” Conti said yesterday at a press conference in London. Enel isn’t planning a capital increase for Enel Green Power, he said. The company’s 2010 and 2011 projections “sound comfortable to us,” analysts at Equita Sim said in a note to clients yesterday. Debt will fall “thanks to 7 billion euros of asset disposals, which remain the main driver for the stock performance.” Enel halved its dividend to 25 cents and said yesterday Ebitda will remain flat this year and next. Net income rose 2 percent to 5.4 billion euros in 2009 on a 970 million-euro gain from the sale of renewable-energy assets to Acciona SA, Enel said in a statement. That beat the 5.1 billion-euro mean estimate of analysts surveyed by Bloomberg. To contact the reporter on this story: Tommaso Ebhardt in London via the Milan newsroom at tebhardt@bloomberg.net ; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net .

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Lloyds Raises $2 Billion as S&P Says Bad Debt May Hurt Lender’s Earnings

March 17, 2010

By Sonja Cheung March 17 (Bloomberg) — Lloyds Banking Group Plc raised 1.5 billion euros ($2 billion) selling subordinated bonds as Standard & Poor’s said bad loans will hurt the lenders’ earnings for the next two years. Britain’s biggest mortgage provider offered investors a yield premium of 325 basis points more than the benchmark mid- swap rate on the 10-year lower Tier 2 capital notes, according to data compiled by Bloomberg. Nordea Bank AB , the Nordic region’s largest lender, sold 1 billion euros of 10-year junior bonds with spread of 123 basis points. Lloyds, 41 percent owned by the U.K. government, is “especially” vulnerable to a relapse in U.K. credit conditions because the bank will have “limited scope” to raise earnings as it maintains provisions for bad loans, S&P said in a report. Banks issue lower Tier 2 debt, which ranks below senior bank loans and other debt for payment, to meet capital requirements. “We expect to see more lower Tier 2 issuance following these bonds from Lloyds and Nordea as investors seek riskier assets,” said Hank Calenti , a credit analyst at RBC Capital Markets in London. The yield premium investors demand to hold lower Tier 2 bonds over government debt is 266 basis points, close to the lowest since September 2008, according to Bank of America Merrill Lynch index data. The Lloyds notes were sold through its Lloyds TSB Bank Plc unit. To contact the reporter on this story: Sonja Cheung in London at scheung58@bloomberg.net

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Greece’s $6.8 Billion in 10-Year Bonds Advance in `Gray Market’ Trading

March 4, 2010

By John Glover and Bryan Keogh March 4 (Bloomberg) — Greece’s 5 billion euros ($6.8 billion) of new 10-year bonds rose in the so-called grey market for issues that haven’t priced after the government offered an interest premium over existing debt. The benchmark securities climbed about 0.25 cent on the euro as of 4 p.m. in London, or 2.5 euros per 1,000-euro face amount, according to traders at Matrix Corporate Capital LLP. Greece is selling the notes at a spread of 300 basis points more than the mid-swap rate, for a yield of 6.35 percent. That compares with 6.09 percent on Greece’s existing benchmark issue due July 2019, according to data compiled by Bloomberg. “I am unsurprised the bonds are performing well,” said Ivan Comerma , head of capital markets at Banc International- Banca Mora in Andorra. “Overall 300 basis points is a very good spread for investors.” Greece is selling the bonds as concern eases the nation will be able to reduce Europe’s largest budget deficit. Prime Minister George Papandreou yesterday announced higher tobacco, alcohol and sales taxes and civil servant salary cuts to help reduce the 12.7 percent gap by 4 percentage points this year. To contact the reporters on this story: John Glover in London at johnglover@bloomberg.net ; Bryan Keogh in London at bkeogh4@bloomberg.net

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Daimler Plans to Double `Green Technology’ Spending, Development Head Says

March 3, 2010

By Chris Reiter March 3 (Bloomberg) — Daimler AG ’s Mercedes-Benz unit, the world’s second-largest maker of luxury cars, plans to nearly double investment on “green” technology to take on BMW in the race to offer electric vehicles. Stuttgart, Germany-based Mercedes intends to spend 1 billion euros ($1.4 billion) in each of the next two years to develop batteries and fuel-saving engines, Thomas Weber , Daimler’s development chief, said today in an interview at the Geneva auto show. Annual spending averaged at about 567 million euros over the past three years. The expanded research budget “shows that we’re continuing to give gas,” said Weber. “It shows that we have the commitment, not just to build show cars, but to bring hybrids, electric vehicles into large scale production.” The “green” spending in 2010 and 2011 is part of Daimler’s plans to increase overall research and development budget, which amounted to 4.2 billion euros in 2009, Weber said. To contact the reporter on this story: Chris Reiter in Geneva via creiter2@bloomberg.net

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Germany, France Consider $41 Billion Bailout Plan for Greece, WSJ Reports

February 28, 2010

By Shiyin Chen Feb. 28 (Bloomberg) — Germany and France are considering a plan to bail out Greece that could cost as much as 30 billion euros ($41 billion), the Wall Street Journal reported, citing an unidentified person familiar with the situation. The plan would involve the sale of Greek bonds to French and German organizations, most likely state-owned banks, as well as to the public, the newspaper said on its Web site. The timing of the deal, which would require the approval by German and French officials, is not yet clear, according to the report. To contact the reporter on this story: Shiyin Chen in Singapore at schen37@bloomberg.net

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Deutsche Telekom Reports Surprise Loss as Greek Budget Crisis Raises Costs

February 25, 2010

By Ragnhild Kjetland Feb. 25 (Bloomberg) — Deutsche Telekom AG , Europe’s biggest phone company, posted a loss in the fourth quarter, primarily on a writedown in the value of its Greek unit. The Bonn-based company reported a net loss of 3 million euros ($4.04 million) on a 500 million-euro impairment charge, it said in a statement today. Analysts had predicted a profit of 597.6 million euros, the average of seven estimates compiled by Bloomberg. The company sees lower 2010 earnings before interest, taxes, depreciation and amortization. “The outlook was slightly disappointing,” said Theo Kitz , an analyst at Merck Finck & Co. in Munich. “The company had given the impression that we might get a forecast for unchanged Ebitda. Instead they guided for a slight decrease.” A Greek writedown had been widely expected, Kitz said, although analysts hadn’t known when it would be booked. The Greek financial crisis and the rise in the country’s interest rates led to a reduction in the value of Hellenic Telecommunications Organization, which is about 30 percent owned by Deutsche Telekom. Deutsche Telekom paid 3.8 billion euros for its stake, which is now valued at 1.31 billion euros based on Hellenic’s market value. Fourth-quarter sales rose 0.6 percent to 16.2 billion euros. In the year-earlier period, Deutsche had a net loss of 730 million euros on 1.1 billion euros in impairment charges and one-time expenses related to job cuts. Cost Cuts Deutsche Telekom slid 0.1 percent to 9.51 euros at 10:55 a.m. in Frankfurt trading. Before today, the stock had lost 7.5 percent this year. Chief Executive Officer Rene Obermann is banking on cost cuts to stem declining profit as the economic slump slows demand for phone services. He slashed expenses by 5.9 billion euros between 2005 and 2009. Deutsche Telekom said today it plans to cut costs by 4.2 billion euros by the end of 2012. “Cost discipline was key to getting through economically challenging times,” he said in the statement. The group’s investments in 2010 will be slightly higher than in 2009, he said at a briefing today. “We expect to largely maintain this level of investment over the next two years,” he said. “At the same time, we will not be making any multi-billion-euro acquisitions.” Expense cuts and rising sales in emerging markets led Vodafone Group Plc , the world’s largest mobile-phone company, this month to raise its full-year cash flow forecast. BT Group Plc, the U.K.’s biggest fixed-line operator, said earnings rose 11 percent in the fourth quarter before interest, taxes, depreciation, amortization and costs to cut jobs. Outlook Deutsche Telekom predicts adjusted earnings before interest, taxes, depreciation and amortization in 2010 of 20 billion euros, down from 20.67 billion euros in 2009. It expects free cash flow of about 6.2 billion euros, compared with 7 billion euros in 2009. “The outlook is a little more cautious than I expected,” said Guy Peddy , an analyst with Macquarie Securities Group in London. Fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization rose 8.6 percent to 5.07 billion euros. Analysts had estimated 16.3 billion euros in sales and adjusted Ebitda of 5.04 billion euros. Yesterday, the company proposed a dividend of 0.78 euros per share for 2009, unchanged from the last two years. It said for the years 2010 through 2012 it is proposing a dividend of at least 0.70 euros per share and share buyback, with up to a total amount of 3.4 billion euros per year. U.S. Operations In the U.S., the company expanded its network and added new handsets to win back customers. Amid the economic slump, T- Mobile USA has faced competition from discount operators and companies offering faster data transfer on smartphones. In the fourth quarter, T-Mobile USA returned to customer growth, adding 371,000, after having lost 77,000 customers in the third quarter. In the fourth quarter of 2008, it had added 621,000 new customers. Sales at the U.S. business fell 5.4 percent in the fourth quarter and operating income before depreciation and amortization fell 12 percent. On Feb. 16, board member Guido Kerkhoff said in an interview that the U.S. business was “back on track” and able to “compete.” Earlier in the month, the company was reported to be considering all options for T-Mobile USA Inc., including an initial public offering, according to three people familiar with the matter. To contact the reporter on this story: Ragnhild Kjetland in Frankfurt rkjetland@bloomberg.net

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Societe Generale Falls as Asset Writedowns Weigh on Profit, Dividend Cut

February 18, 2010

By Fabio Benedetti-Valentini Feb. 18 (Bloomberg) — Societe Generale SA , France’s second-largest bank by market value, fell as much as 6.2 percent in Paris trading after writedowns tied to risky assets weighed on fourth-quarter profit and the company cut its dividend. Societe Generale fell 2.17 euros to 39.83 euros by 12:21 p.m., bringing the decline this year to 19 percent. The Paris- based bank cut its dividend to 25 cents a share for 2009 from 1.2 euros a year earlier, it said in a statement today. The French bank, still adding up the cost of the global financial crisis, reported about 1.6 billion euros of writedowns and provisions linked to toxic assets, exceeding an estimate of about 1.4 billion euros it provided last month. A 732 million- euro gain from the creation of an asset-management venture with Credit Agricole cushioned the effect on earnings. “They continue to disappoint with negative charges each quarter,” said Jonathan Tyce , a London-based analyst at FBR Capital Markets International Ltd. who has an “outperform” rating on the stock. “Other top investment banks are talking about a good start in 2010. SocGen has taken risk off and you can question whether they’re off to the same good trend.” Trailing BNP Paribas Net income was 221 million euros in the fourth quarter, up from 87 million euros a year earlier. The bank’s earnings have lagged behind larger rival BNP Paribas SA throughout the crisis. BNP Paribas posted a 1.37 billion-euro fourth-quarter profit yesterday, helped by the purchase of Fortis assets and lower provisions for bad loans. For the full year, BNP Paribas earned 5.8 billion euros, compared with 678 million euros at Societe Generale. Societe Generale Chief Executive Officer Frederic Oudea indicated the worst impact from the financial crisis is past. “In 2009 we’ve done a big cleaning because of the crisis, and namely on the U.S. residential” market, Oudea said in an interview on France’s Radio Classique today. “I remain very confident on a rebound capacity” and further writedowns this year would be “infinitely more modest than in 2009,” he said. Bonus Pool Societe Generale has a 2009 cash bonus pool of about 250 million euros for its so-called market professionals, or an average of about 96,100 euros each. BNP Paribas set aside 500 million euros for cash bonuses to its capital-market employees, or about 125,000 euros each. On average, 55 percent of the variable compensation at Societe Generale is deferred over three years, paid in the bank’s stock and can be clawed back if performance criteria are not met. BNP Paribas’s variable pay was subject to similar conditions. The corporate- and investment-banking unit at Societe Generale had a 563 million-euro loss in the fourth quarter, compared with a restated 937 million-euro loss a year earlier. The French retail bank earned 188 million euros, compared with a profit of 290 million euros. The international retail banking unit had earnings of 97 million euros, compared with a loss of 75 million euros in the fourth quarter of last year. Societe Generale marked down mortgage-related securities because of an increase in estimated loss rates on U.S. subprime and prime loans. Chief Financial Officer Didier Valet told reporters on Jan. 13 that the bank “hardened” its assumptions in valuing risky assets. Toxic Assets The bank, which had about 10 billion euros in markdowns and provisions stemming from the financial crisis through September, said last month it plans to isolate risky assets in a separate unit. The company had about 35.5 billion euros of such assets remaining at the end of 2009 from holdings including asset- backed securities and debt backed by U.S. bond insurers, according to a presentation on the company’s Web site. Oudea, 46, is seeking to rebuild profitability at its investment bank two years after the company announced a record trading loss, which it blamed on unauthorized positions amassed by former trader Jerome Kerviel . Kerviel, 33, will stand trial for his role in the 4.9 billion-euro loss in June, a Paris court said last week. He has admitted to covering up his bets on stock index futures with fake orders to hedge positions, while asserting there was no crime because the bank knew what he was doing. Societe Generale raised 4.8 billion euros in a rights offer in October to repay 3.4 billion euros of state funds, bolster capital and finance acquisitions. It agreed in December to pay 676 million euros to Dexia SA to take full control of the French consumer-banking network Credit du Nord. To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net .

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Spain Offers Investors Higher Premium in 5 Billion-Euro, 15-Year Bond Sale

February 17, 2010

By Caroline Hyde and Sonja Cheung Feb. 17 (Bloomberg) — Spain will pay investors a higher yield than on existing debt in its 5 billion-euro ($7 billion) sale of new 15-year bonds. The notes will yield 85 basis points more than the benchmark swap rate, according to a banker involved in the transaction. That’s a 12 basis-point premium to where its current 15-year benchmark bonds trade, according to data compiled by Bloomberg. A basis point is 0.01 percentage point. Spain received orders for more than 13 billion euros of the debt from investors, said the banker, who declined to be identified because the information is private. The sale is Spain’s first syndicated issue since concern about the ability of European countries to contain budget deficits roiled markets. “Spain’s bond offers a decent premium, and at the 15-year point will be attractive to long-term investors, like pension funds,” said Axel Botte , a fixed-income strategist at Axa Investment Managers in Paris, where he helps to oversee 500 billion euros of assets. Spain hired Banco Bilbao Vizcaya Argentaria SA, Credit Agricole SA, HSBC Holdings Plc, Banco Santander SA and Societe Generale SA to manage the sale, the banker said. Greece Pressure The country is selling bonds as European finance ministers increased pressure on Greece to rein in its deficit as the region’s largest budget gap hurts its neighbours. Spain, which has the euro region’s third-biggest deficit, needs to sell 97 billion euros of longer-dated debt this year to replace maturing bonds and fund its budget, according to government estimates. “Spain is being proactive by front loading and securing its financing despite the current market volatility,” said Axa’s Botte. Portugal offered a premium of more than 20 basis points over existing debt to sell 3 billion euros of 10-year notes last week. The debt was priced to yield 140 basis points over swaps, and currently trade at a spread of 123, Bloomberg data show. Spain’s bond is the first 15-year issue by a southern European country since Greece raised 7 billion euros from the notes in November, Bloomberg data show. The yield on Greece’s 15-year bonds widened to 264 basis points over swaps, from an issue spread of 142, Bloomberg data show. Spain, struggling with the highest unemployment rate in the euro region, has been in a recession since the second quarter of 2008 and the government expects the economy to contract again for the full year. The country’s gross domestic product fell 0.1 percent in the fourth quarter and 3.1 percent from a year earlier, the National Statistics Institute said today in Madrid. To contact the reporters on this story: Caroline Hyde in London chyde3@bloomberg.net ; Sonja Cheung in London at scheung58@bloomberg.net

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ING Posts $980 Million Fourth-Quarter Net Loss, Twice as Wide as Estimated

February 17, 2010

By Martijn van der Starre Feb. 17 (Bloomberg) — ING Groep NV , the biggest Dutch financial-services company, reported a fourth-quarter loss as the bank and insurer set aside 930 million euros ($1.28 billion) for extra payments to the Netherlands after receiving state aid. The net loss narrowed to 712 million euros from 3.71 billion euros in the year-earlier period, Amsterdam-based ING said in a statement today. Excluding divestments and special items, the company had a 74 million-euro profit in the three months ended Dec. 31. “We view this result positively as it means that the group’s capital base was not impacted despite ongoing large writedowns of risky assets,” Duncan Russell , a London-based analyst at JPMorgan Securities Ltd., said in a note to investors today. “The main capital ratios were ahead of expectations.” Russell rates ING shares “overweight.” ING received 10 billion euros from the Dutch government in 2008, of which it repaid half in December, and a guarantee on U.S. mortgage-related assets last year. European Union regulators approved ING’s taxpayer-funded bailout in November, after the company agreed to sell its insurance and U.S. online banking divisions and make additional payments to the state for the risk transfer of 21.6 billion euros of mortgage assets. ING, created by the 1991 merger of insurer Nationale Nederlanden and NMB Postbank Group, climbed 32 cents, or 5 percent, to 6.77 euros as of 11:25 a.m. local time, valuing the company at 25.9 billion euros. BNP Earnings European banks also rose today as BNP Paribas SA , France’s largest, reported its fourth straight quarterly profit, helped by the acquisition of Fortis and after setting aside less money for bad loans. ING’s results included a charge of “less than 200 million” euros tied to Dutch lender DSB Bank NV’s bankruptcy in October and a gain on the sale of ING’s stake in its life insurance and wealth-management venture in Australia and New Zealand. “Negative market impacts,” including real estate and mortgage-backed securities impairments, amounted to 992 million euros in the quarter, the company said. Both the fourth-quarter net loss and the profit excluding divestments and special items missed the average estimate s of analysts surveyed by Bloomberg. ‘Year of Transition’ “2010 will be a year of transition, and it will not be without challenges, as we work towards the operational separation of the banking and insurance businesses,” Chief Executive Officer Jan Hommen said in the statement. ING aims to separate the units operationally by year-end. The company continues to evaluate all divestment options for the insurance businesses, “although given market circumstances it looks more like a public market option today,” Hommen told reporters. Banking profit before tax was 132 million euros, while the insurance businesses posted a pretax loss of 47 million euros. ING set aside 686 million euros for doubtful loans, down from 576 million euros a year earlier. The bank’s core Tier 1 capital ratio, a key measure of a lender’s ability to absorb losses, rose to 7.8 percent. “Retail banking and commercial banking, excluding ING Real Estate” were strong, Dirk Peeters , a Brussels-based analyst at KBC Securities, said in a report. “They are to become the backbone of the group post restructuring,” said Peeters, who has a “buy” recommendation on ING. Appeal The company’s investment exposure to Greece, Portugal and Spain is about 3 billion euros, 1.9 billion euros and 3 billion euros, respectively, Chief Risk Officer Koos Timmermans told reporters today. ING and the Netherlands said in January they’ll appeal the decision by the European Commission, the EU’s antitrust regulator, on the company’s government bailout. ING will contest the way the EU calculated the amount of state aid it received and the “disproportionality of price leadership restrictions” imposed by the regulator, it said at the time. The lender, which traces its roots to 1743, repaid part of the government aid early in December after raising 7.5 billion euros in a rights offer. ING and the Netherlands agreed on a reduction of the repayment premium for the first 5 billion euros. The commission views this reduction as additional state aid of about 2 billion euros, ING said last month. To contact the reporter on this story: Martijn van der Starre in Amsterdam at vanderstarre@bloomberg.net

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