Greek Debt Swap Attracts 86% Participation; Linde Soars 5%

Arthi Gupta
09 Mar, 2012
New York City

European indexes edged slightly higher after Greece successfully completed the bond swap deal that attracted nearly 86% of its private bond holders. Linde soared 5% after reporting record annual results in fiscal 2011.

[R]1:30 PM Frankfurt – European indexes edged slightly higher after Greece successfully completed the landmark bond swap deal that attracted nearly 86% of private bond holders. Linde soared 5% after reporting record annual results in fiscal 2011.[/R]

European indexes edged higher after Greece successfully completed the landmark bond swap deal with 85.8% of its private bond holders agreeing to participate in the debt restructuring.

Greece will use collective action clause to increase the participation rate to 95% and is less likely to be challenged in courts.

Greece said that holders of €177 billion Greek bonds agreed to the exchange and 69% of holders of Greek bonds issued under different laws worth 20 billion agreed as well. The high participation rate will save Greece from defaulting on its latest repayment due in ten days.

The tough bargain struck by Greece was a high stake gambit that worked for Greece and constant rhetoric of default forced many investors to accept the aggressive bargain.

Private investors agreed to take a 53.5% haircut of their existing Greek holdings worth €206 billion in exchange for new bonds that pay lower interest rate.

The Greek Finance Ministry stated the country received tenders and consents for €152 billion under Greek law and an additional €20 billion of foreign-law bonds were also tendered, and also extending the tender on foreign-law bonds to March 23.

The debt swap offer was a pre-condition by the troika, namely the International Monetary Fund, the European Union and the European Central Bank, for releasing the €130 billion bailout to Greece.

The bailout is crucial for Greece to avoid defaulting on its debt on March 20 with the payment due of €14.5 billion.

The euro zone members are targeting Greece to reduce its total indebtedness to 120.5% of GDP by 2020 from the current level of 160%.

Markets were calm in trading after Greece released substantially higher than expected participation in the exchange and the International Swaps and Derivatives Associations is expected to meet this afternoon to decide if the use of the collective action clause would trigger the credit default swaps.

In Paris trading, the CAC-40 Index gained 1.63 or 0.1% to 3,479.99 and in Frankfurt the DAX Index edged higher 18.77 or 0.3% to 6,853.46.

For the week, the CAC-40 Index fell 0.6% and the DAX Index declined 1%.

Italy’s 10-year yield fell four basis points to 4.77%. The Spanish 10-year yield declined 11 basis points to 4.95%.

Germany Factory Turnover Up

Germany's factory turnover increased a seasonally and working-day adjusted 0.4% from a month ago in January, following a 1.4% drop in December, data from the Federal Statistics Office showed today.

Greece Inflation Eases

Greece's consumer price index eased to 2.1% annually in February compared to the 2.3% gain in January, data from the Hellenic Statistics Authority showed.

From a month ago, prices fell 1.5% in February, following a 0.8% drop in January.

Gainers & Losers

Deutsche Bank AG dipped 0.3% to €35.37 after the global investment bank took between €5 billion and €10 billion in loans from the European Central Bank's emergency lending program last week, according to media reports on Thursday.

Deutsche EuroShop AG rose 2% to €26.43 after the shopping center investor reported fiscal 2011 revenues climbed 32% to €190 million from €144.2 million in the previous year. Annual consolidated profit of €93.4 million or €1.81 per share for compared to loss of €7.8 million euros or 17 cents per share a year ago.

Lagardere SCA plunged 5.9% to €22.37 after the French media group said fourth quarter net sales declined 9.1% to €1.951 billion from €2.146 billion in the year ago quarter. On a like-for-like basis, net sales for the fourth-quarter declined by 0.2%.

Net sales for full-year 2011 were €7.657 billion, representing a decrease of 3.9% on a reported basis, but increase of 0.2% on a like-for-like basis.

Linde AG soared 5% to €132.25 after the German industrial gases firm reported fiscal 2011 group sales improved 7.1% to €13.787 billion from €12.868 billion in 2010. Net earnings attributable to shareholders rose 16.4% to €1.174 billion or €6.88 per share from €1.005 billion or €5.94 per share reported a year ago.

Schneider Electric SA, the specialist in energy management fell 1% to €50.50 after a broker downgrade.