Monday, 5 July 2010

Greek Pharma Debt Restructuring hits International Press

The international financial press is starting to pick up on the fact that the restructuring of Greek government debt has begun. On June 19th, I reported on this blog that, based on the agreement reached by the government and the pharmaceutical suppliers to the public healthcare system, a restructuring of at least 15% was planned for those debts settled using Greek government bonds.

Yesterday, John Dizard wrote in the Financial Times (“It’s no secret: Greece is restructuring debt”) about this same agreement. He references a joint Press Release by the Ministry of Health and Social Welfare, and the Ministry of Finance, which states that:

“In case suppliers settle these bonds by January 2, 2011, it is estimated that the total cash received would be close to EUR 6 billion”. The above “discounts” corresponds to a total percentage of about 19%”

Dizard writes further that, according to his research

And while the release says the debts “will be settled”, major suppliers have not yet agreed to the hospital debt bloodletting. According to a London dealer in edgier emerging market paper, some of the suppliers have already been around to get a bid. Unsuccessfully, sad to say, even though the suppliers’ banks have that promise of “ECB” repo availability. He sniffs: “You won’t get a bid at 50 [per cent of face]. My guessing is that it is more like 30. We were appalled at the very low quality of the documentation.”

In other words, unless a pharmaceutical supplier is determined to hold on to a bond until its term is due, selling this onward will bring less than 50% its actual value.

For those interested, press reports are beginning to emerge that the Ministry of Finance is considering a similar settlement for debts owed to construction firms. 

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