Greece To Raise 3 Billion-5 Billion Euros In Junk Debt, Maybe

Greece has decided to raise three billion to five billion euros through a 10-year bond. The country has hired several banks including Barclays (BCS) and HSBC (HBC) to handle the transaction.

The bonds have not been priced, and perhaps they never will be.

Greece will try to rely on the support of other eurozone nations which may buy some of the paper. But, Germany recently said it will not help bail out Greece and that may include avoiding an investment in the bond issue. If Germany turns it back on Greece, the capital markets likely will as well.

Greece may have to pay dearly to get the money and that may derail the issue. The nation has 23 billion euros in debt service due in the spring and investors will use that as a form of usury. Greece may not be able to pay the sort of double-digit interest  rates that corporations issuing junk debt do.

The most certain reason that investors will turn their backs on Greece is if the nation’s unions continue work stoppages, which are already severely damaging the economy. Buying bonds which rely on whether a country will be seized by chaos is likely to be a losing proposition.

Douglas A. McIntyre