Greece tempts private equity with high-reward, high-risk deals

Fri Mar 8, 2013 12:52pm EST

ATHENS (Reuters) – Private equity firms are taking another look at Greece, attracted by the cheap price tags on companies that can offer lucrative opportunities for those brave enough to take the risk.

Even before the 2009 debt crisis that almost pushed Greece out of the euro, its private equity market was small by European and U.S. standards but now both domestic and international private equity investors are assessing whether the time is right to jump in.

“We should have started raising a new fund two years ago. But then Greece’s position in the euro zone was uncertain,” said Theodore Kiakidis, a partner with Greek private equity firm Global Finance since 1993. “We think now is the time to look at this actively.”

A number of foreign private equity groups have already taken the plunge in Greece and others are sniffing for deals in Spain, another debt crisis casualty. Their aim is to invest in cheap or underperforming businesses to sell them later at a profit.

BC Partners and TPG Capital are among those vying for a 33 percent stake in Greek gambling monopoly OPAP (OPAr.AT), one of the privatizations underway in the country.

Rhone Capital in January offered to buy a 39 percent stake in SB Industrial Minerals SA (BARr.AT), a group with a market value of about 290 million euros ($379.39 million) and sales in over 70 countries.

Oaktree Capital Group LLC (OAK.N) and Fortress Investment Group LLC (FIG.N) are among those with people on the ground in Greece scouting for deals.


The risks are high for these firms because the economic backdrop is challenging. Private equity’s pre-crisis deals in Greece have in general also disappointed.

The Greek economy is expected to shrink for a sixth consecutive year by 4.5 percent, bringing total gross domestic product contraction in 2008-2013 to about 25 percent.

But there are some positives. The country’s central bank expects the economy to turn the corner in 2014. The Athens stock exchange .ATG is up 42 percent in the last six months.

And company valuations are low because many have big debts and are struggling to make money. In this situation, private equity has a better chance of investing successfully in cash-strapped businesses.

“There are liquidity needs that a private equity fund could cover, there are now willing sellers, there are banks that have to lighten their balance sheets. Crucially, there is light in the end of the tunnel for the economy,” Kiakidis said.

Global Finance in January completed the sale of a 56.5 percent stake in irrigation equipment maker Eurodrip SA for about 68 million euros to U.S. private equity group Paine Partners LLC, making a return of more than 1.5 times.

The deal was attractive to Paine partly because Athens-based Eurodrip was a global company that derived 93 percent of its revenues outside Greece. Another attraction was that banks consented to the buyer assuming the company’s debt, negating the need for new financing, Kiakidis said.

Marfin Investment Group (MRFr.AT), a publicly-listed holding company whose original investors suffered heavy losses, is currently talking to investors about the possibility of issuing new equity or a convertible bond to raise up to 410 million euros to capitalize on new opportunities, mainly though bolt-on acquisitions by its portfolio companies.

“We believe people could easily double their money between two to three years’ time, an over 30 percent internal rate of return,” its deputy chief executive George Koulouris said. “Such is the disconnect between where asset values are and where they should be,” he said. “We see in our own portfolio that the worst quarters are behind us.”


Despite this optimism, no one has yet done a deal in Greece that aims to take control of a company by buying its debt.

“While the environment is improving, private equity is still not comfortable with investing in Greek companies that are directly exposed to the Greek economy,” said Fotis Hasiotis, head of European financial sponsors at Lazard.

Few Greek companies up for sale fit the global profile of a Eurodrip or an SB that would make private equity more comfortable about investing. And banks have been reluctant to book losses by facilitating major debt restructurings.

But one option for international private equity firms to find a way into Greece’s corporate sector would be to provide much-needed cash at affordable rates, which is scarce in Greece for even the healthiest of companies.

“I believe the greatest opportunities for alternative fund managers in Greece are primarily in direct lending at the top end of the capital structure to quality high-yield large corporate borrowers, and providing growth capital to healthy fast-growing mid-caps,” said Kostas Vassiliou, head of global corporate clients and debt capital markets at Greece’s Eurobank.

($1 = 0.7644 euros)

(Reporting by Greg Roumeliotis in Athens. Editing by Jane Merriman)

Greece set for comeback as tourist destination

Fri Mar 8, 2013 5:27pm IST

BERLIN (Reuters) – Tourism in Greece is bouncing back this year in an otherwise flat European market, held back by the weak economic climate, travel industry executives said.

The desire for a beach holiday closer to home for cost-conscious consumers in Europe is helping to revive tourism demand in the country, battling recession and a debt crisis.

Doerte Nordbeck from market research group GfK showed in a presentation at the ITB travel fair this week that bookings to Greece from Britain, Germany and the Netherlands for this summer were up 10 percent.

Tourism income for Greece, its chief money spinner, fell by 4.6 percent to 9.89 billion euros from January-November in 2012 according to the country’s central bank.

Arrivals from Germany, Greece’s biggest tourism market, dropped by almost a fifth, partly on fears about a backlash on German tourists caused by Berlin’s tough austerity demands on Athens.

Alltours, Germany’s No. 4 tour operator, said bookings for holidays in Greece were up 30 percent on the year by March 5, boding well for the country where tourism accounts for around one fifth of output and one in five jobs.

“The tourism industry in Greece has overcome the crisis of the last two years and is now back on top form,” said Willi Verhuven, chief executive of German tour operator Alltours.

Verhuven said the company was in particular seeing a surge in bookings from repeat customers who had ditched Greece in favour of other resorts.

Europe’s largest tour operator TUI Travel is also seeing a comeback for Greece, with bookings at the group’s German unit up 4 percent. Bookings from the UK are performing strongly, a spokesman said.

German Chancellor Angela Merkel, who opened the ITB fair this year, called on trade fair visitors to take holidays in ailing euro zone states like Greece, Spain, Portugal and Italy to help to create jobs.

“I also wish that European countries which are famous for tourism get good custom – I name Greece, Spain, Portugal, Italy – all countries in which growth is really necessary at the moment and where we have to make an effort to finally get people back into work,” she said.


Globally, the tourism industry – worth an estimated $1.15 trillion last year – is expected to grow by between 3 and 4 percent in 2013, driven by up to 6 percent higher visitor numbers in emerging markets, according to latest estimates from the UN World Tourism Organisation (UNWTO).

It sees growth in Europe, the world’s No. 1 tourist destination, slowing to 2 percent or holding steady at 3 percent as the region’s debt and financial crisis rumbles on.

But Germany’s federal tourist association BTW forecasts growth of just 1 to 2 percent this year due to the uncertain economic environment.

“If the weak economy begins to seriously affect the employment market and domestic demand then this will also impact on the tourism industry,” group president Michael Frenzel said.

Germany’s national tourist board also sounded a note of caution. “The European financial and debt crisis is still a long way from being overcome yet,” said Klaus Laepple, president of the tourist board.

Emerging markets like China and Russia will continue to be the main driver of growth for international tourism, Rolf Freitag, head of tourism consultancy IPK, said.

Asia Pacific is seen recording the biggest increase in visitor numbers this year, with growth of between 5 and 6 percent, followed by Africa, where arrivals are expected to increase by between 4 and 6 percent, UNWTO said.

Last year, emerging market countries attracted 4.1 percent more tourists while their mature counterparts catered for 3.6 percent more travellers, according to UNTWO data.

(Editing by Jane Merriman)