Greece: State Makes Deal With JP Morgan
June Samaras
Greece: State Makes Deal With JP Morgan
Associated Press 08.22.07, 2:54 PM ET
ATHENS, Greece -
Four Greek state pension funds reached an agreement Wednesday with
U.S. investment bank JP Morgan and a London-based hedge fund that
could help end a month long bond trading scandal that has embarrassed
the government.
The deal comes less than a week after Prime Minister Costas Karamanlis
called early general elections for September 16, six months before his
four-year term was due to expire.
Opinion polls had shown the governing conservatives' lead over the
opposition Socialists narrowing recently - a drop that has been
attributed partly to fallout from the bond scandal.
Under the agreement, JP Morgan and the hedge fund, North Asset
Management, will buy back $379 million worth of bonds that were bought
by the pension funds at inflated prices in February. State-run NET
television reported that JP Morgan would also pay $3.65 million to
cover interest payments accrued during a three months' delay in
finalizing the deal.
"The process for the buyback of the 280 million (euros) in bonds was
completed today," Labor Minister Vassilis Manginas said in a
statement.
The scandal forced Manginas' predecessor as labor minister to resign
and led to opposition calls for a wider parliamentary investigation.
The structured bonds were sold in February to state pension funds.
They had been underwritten by JP Morgan on behalf of the Greek
government and sold to London-based hedge fund North Asset Management
in February for 92.95 percent of their nominal value. They were then
sold to Germany's HypoVereinsbank and Greek brokerage Acropolis
Securities, before eventually being purchased by four state pension
funds at inflated prices in the secondary market.
In June, JP Morgan and North Asset Management agreed to buy back the
entire bond issue and make good the losses that the pension funds had
suffered on their purchase, in a deal widely thought to have ended the
long-running saga. But that government-brokered arrangement faltered
after the pension funds objected to certain details.
The bond affair has been a major political issue for much of this
year, prompting criticism from opposition parties as well as public
protests. Some media commentators have suggested that the government
brought the election date forward partly to avoid any politically
embarrassing revelations before the vote.
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June Samaras
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