Greece said to plan to sell off pension arrears to get cash upfront

Greece plans to sell billions of euros of social security contributions owed to its pension fund to private investors to get cash upfront and facilitate recovering other receivables, senior government officials told Reuters on Thursday.

The country’s conservative government, which took over in July, is keen to boost investment inflows and fix major issues affecting economic recovery prospects, including bad loans plaguing the banking sector.

It is also looking at ways to repair the social security system’s overall balance sheet to strengthen its viability.

“There is a strategy to sell arrears the state social security system has not managed to recover in past years,” one of the government officials said.

The arrears represent social security payments for staff owed to pension funds by private companies in Greece, partly because of the country’s debt crisis.

The project, headed by Deputy Labor and Social Affairs Minister Panagiotis Mitarakis, will look into selling a first batch of up to 12 billion euros ($13.22 billion) of legacy arrears out of about 35 billion on the social security system’s books.

The process will not involve securitization because issuing asset-backed securities may be treated as borrowing and face obstacles with Eurostat, the European Union’s statistics service that harmonizes statistical methods across its member states.

Instead, the government will look into selling the arrears to private investors for a cash downpayment and agree a profit sharing scheme from any recoveries. Selling such arrears will be done at discounts to the nominal value.

Potential buyers will need to use a servicer as do specialist funds which buy non-performing loans from banks.

The project will set December, 31 2014 as a cut-off date, meaning it will try to sell off arrears accumulated up to that date. It will focus on amounts owed above 100,000 euros. It will not include arrears which already have a repayments plan or arrears of the self-employed.

“It will be a way to get quick upfront cash and improve our ability to focus on collecting more recent arrears, relieving the current administrative weight,” the senior official said.

Officials are aiming to fine-tune the process by the end of this year and proceed with preparatory work in the first quarter of next year so that sales can take place in the second quarter of 2020.

The government is also looking for an adviser for the project.

[Reuters]