Funds price Greek NPLs at very low rates
Investment funds preparing to profit from Greek nonperforming loans are offering rates of between 5 and 15 cents per euro for the purchase of bad corporate loans, in anticipation of a legal framework that would allow them to enter the local market.
The repayment of those loans is considered impossible, as the majority of the enterprises that have received them are at the bankruptcy stage and their assets comprise nothing more industrial real estate or equipment.
By contrast, the rate for NPLs taken out by sustainable corporations with high borrowing come to 40-50 cents per euro, which factors in the writing off of half of the debt when the funds take control of their management, which would ensure that costs would be cut and the company would undergo a general tidying up ahead of their sale.
Bank officials say the rates currently being quoted in the local market have declined significantly compared to a year ago, when the prices of bad corporate loans came to 30 cents per euro, as economic conditions have deteriorated considerably in the meantime. The high country risk factor is increasing the potential cost for the distressed debt funds that are eyeing the local market with interest due to the high accumulation of bad loans in bank portfolios.
