Deadline in Athens (Updated)

The result of the voting in the Greek parliament over renewed confidence to Prime Minister George Papandreou is waited any time soon now. Today’s trading session in the credit market insinuate that investors already seem to be pricing in a victory for the beleaguered Greek minister.

“Papandreou has to survive a vote of no confidence, due around midnight tonight.”

Gavan Nolan

The political future of George Papandreou may be in doubt but the markets seem to be pricing in a victory for the beleaguered Greek prime minister, according to Markit Financial Information.

Euro zone finance ministers put the onus back on the Greek political establishment yesterday when they said that they would refrain from disbursing the next tranche of aid until the next round of austerity measures had been passed.

Before that, more obstacle is to be  faced later this month.

“Papandreou has to survive a vote of no confidence, due around midnight tonight. His reshuffle last week, in which he promoted his main rival Evangelos Venizelos to finance minister and deputy PM, seems to have placated his critics within the socialist PASOK party and made his position less precarious,” credit analyst Gavan Nolan writes in Tuesday’s Intraday Alert from Markit.

Pointing out: “Most Greek political analysts expect a slim victory for Papandreou tonight, and that was enough to trigger a bout of short covering.”

The Markit iTraxx SovX Western Europe index was 13 basis points tighter at 211 bp’s, reversing much of the recent widening (it was as wide as 240 last Thursday).

“This had the typical knock-on effect on financials, and that in turn helped the Markit iTraxx Europe rally 4 bp’s to 107.25. We will see whether the rally has legs tomorrow if indeed Papandreou survives the no confidence vote,” Nolan writes.

SABMiller was comfortably the worst performer in the corporate market today after it made a $9.5 billion takeover bid for smaller Australian brewer Foster’s Group.

The offer, representing an 8.2% premium to Foster’s Monday closing price, was rejected by the target company.

“It is entirely possible that this is just the opening gambit from SABMiller, and it could return with an improved offer,” Nolan notes.

Other major brewers could also enter the fray.

That prospect didn’t seem to enamoured the credit markets, where SABMiller’s spreads promptly widened by nearly 20 bp’s to close around 100.

The deal will be financed by existing cash and new debt facilities, and this will have a detrimental effect on the balance sheet.

Sino Forest’s bonds plunged even further today after it was revealed that the company’s largest shareholder, hedge fund Paulson & Co, had sold its entire holding.

It suffered another blow when Fitch cut its rating to BB– from BB+, the agency citing the company’s complex capital structure.

Sino has seen its credit spreads widen sharply since it was targeted by short seller, who highlighted apparent inconsistencies in the company’s reporting.

It’s 6.5% 2017 bond is now trading at 40 – it was trading at 94 at the beginning of this month.

The ISDA Determinations Committee ruled today that a failure to pay credit event had occurred in respect of Irish bank AIB.

“This supersedes the earlier ruling that a restructuring credit event had occurred. A credit event auction for senior and subordinated CDS will be held in due course,” Gavan Nolan concludes.


REUTERS: The Greek government won a vote of confidence early Wednesday, overcoming a first hurdle in winning new financing to avoid bankruptcy.

More than half the deputies in the 300-strong parliament backed the socialist government of Prime Minister George Papandreou, who reshuffled his cabinet last week to stiffen resolve behind a painful new austerity program.


Filed under International Econnomic Politics, National Economic Politics