Thursday, May 22, 2014

The Piraeus-Marfin Deal --- Follow-up (1)

Below are two interesting comments which I received on my recent article about Bank Piraeus' deal to purchase 250 MEUR convertible bonds of the MIG Group.

Prof. Yanis Varoufakis in his blog 
"This deal makes no sense except in the context of the tangled web of accumulateddebt binding Pireus and MIG. To be more precise, of MIG’s  €1.37 billion debt something between €700 to €780 million are owed to… Pireus. Of those debts some are due to past Pireus loans to companies in MIG’s portfolio and others due to the complex deal by which the branches of the Cypriot banks were ‘transferred’ to Pireus ownership.

In this context, from quasi-insolvent MIG’s perspective, the deal represents a badly needed capital infusion (as opposed to a refinancing deal). And from the perspective of Pireus, it reduces its… exposure to loans extended to MIG.

When last year the Cypriot banks folded, Pireus rushed in to buy MIG’s Marfin-Laiki Bank and the Greek branches of the Bank of Cyprus. It paid next to nothing for these. In the process, together with the Cypriot banks’ Greek branches, Pireus acquired, at a 50% discount, loans worth (at least on paper) €325 million, netting a paper gain for Pireus of around €160 million.

You should not be be surprised that last year’s purchase of the folded cypriot banks was underpinned by a promise such as: 'You hand over to me now the Cypriot bank branches, including the discounted loan portfolio, and I shall repay you next year with a capital infusion which reduces your exposure to me and my exposure to you.'

If, lastly, you place this new deal in the context of the sordid past relationship between the ‘brains’ behind these two organisations, the picture becomes astonishingly clear. And the Greek government’s (as well as the troika’s) connivance in it astoundingly repulsive.

A Bank of Greece insider (known to me for some time) 
"Although I have always been taking Varoufakis’ views with a pinch of salt, especially when it comes to the issue of the Eurozone Greek membership, I shall agree with the point made herewith.

The problem, however, lies with the Head of the Bank of Greece who is held responsible for a number of such shady dealings. The funny thing is that even though the market has long ago been accusing him in cases like the enforced purchase of Greek bonds by private entities shortly before the haircut and his relations with the head of Piraeus Bank, nobody talks about these issues now!

By contrast he has embarked in an extensive public relations campaign, asking – almost begging – the Prime Minister to renew his term in the Bank of Greece for six more years!

It was encouraging that you have pointed the matter out to me. But it seems it is just you so far!

Let’s hope that more will follow. However, a follow up in your blog on the issue would contribute to the direction of replacing this person in the next few days, as his term expires mid-June".

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