WSJ: As Investor Sentiment Improves, Greece Goes On Charm Offensive in NYC

By Carolyn Cui

Investors can now add this fact to the various signs that Greece is shedding its image as a euro-crisis poster child: The second annual Greece Investment Forum in New York has moved digs.

Last year’s event, held in October just

And whereas 280 people showed up to hear 12 companies make their pitch to a skeptical audience of U.S. investors last year, there are over 400 people registered for Wednesday’s event and 25 firms presenting. The lineup includes the country’s largest banks, energy producers and construction companies.

“Sentiment has just changed. This time last year, everybody thought Greece was going to drop out of the euro zone,” said Paul Rawkins, lead Greece analyst at Fitch Ratings, which on May 14 raised the country’s credit rating by one notch. It’s a “belated recognition” of what Greece has achieved in tackling its deficits and reforming its economic structure, as well as its stabilized political system, he said.

Ordinary Greeks are still grappling with a recession that’s now in its sixth year and with unemployment at 27%. But an influx of funds has driven up the price of Greek bonds and pushed down their yields from lofty heights that signified deep distress, creating financing opportunities for a few local firms. Energy company Hellenic Petroleum ELPE.AT -0.80%, one of the firms participating in Wednesday’s charm offensive, raised €500 million through the issue of four-year bonds in April, and bottle-producer Frigoglass FRIGO.AT -0.99% sold €250 million in five-year bonds last month.

And just this week, U.S.-based Japonica Partners announced a tender offer for up to $3.8-billion in face value of bonds issued by Greece, representing about 10% of the outstanding Greek debt.

Even with Fitch’s ratings upgrade, Greece’s access to capital markets remains restricted. The yield on its 10-year notes is at around 9%, an unsustainable level for long-term funding.

Yet that’s down from a peak of 41.3% in March 2012, thanks to a remarkable rally. Greek government bonds were the top performing asset in the world in 2012 – delivering a whopping 340% total return to investors – and Greece’s stock market has nearly doubled in value over the past year. Foreign investors now account for 53.2% of its total market capitalization, the highest since the end of 2007, according to Socrates Lazaridis, chairman of the Athens Stock Exchange.

Both domestic and international factors account for this turnaround. On the local front, the business environment benefited from a host of reforms implemented as a condition of the bailouts provided by euro-zone member countries and the International Monetary. More broadly, European Central Bank President Mario Draghi revived confidence in the euro zone as a whole by raising the prospect of ECB sovereign bond purchases to save the euro.

Now, the organizers of this week’s gathering — the American-Hellenic Chamber of Commerce and the Athens Stock Exchange — are trying to capitalize on the enthusiasm of a few U.S.-based investors to give more momentum to this recovery. Investment bankMorgan Stanley MS -0.70% is among the event’s top sponsors, and large hedge funds such as Third Point LLC and Fortress Investment Group FIG -0.42% are on the program. Executives from Procter & Gamble PG -0.37% and Hewlett-Packard Co. HPQ -1.14% will present “success stories” from their recent investments in Greece, said Yanos Gramatides, president of the American-Hellenic Chamber of Commerce.

Yet the obstacles to further growth are formidable, most prominently in the form of sky-high public debt. Greece’s debt-to-GDP ratio stood at 156.9% in 2012, and isn’t projected to fall to 120% until 2020. “You need to see it come down for a period of time for the market to become convinced that Greece is capable of paying market rates,” said Mr. Rawkins of Fitch.

This debt overhang means “the economy in Greece is starving for capital,” said Hans Humes, chief executive of Greylock Capital Management, LLC, a New York-based investment firm with $600 million in assets. Mr. Humes, who sat on a creditors’ committee that helped negotiate a 2012 restructuring in Greek debt, will attend this year’s conference. Last year, he sent a subordinate.

Investors are also skeptical of how ongoing austerity measures mandated by the bailouts will impact the economy.

“It’s still risky, but the perception of risk is dramatically lower than it was a year ago,” Mr. Humes said. When a country is recovering from such depressed levels, he said, “it doesn’t take a lot of growth for things to get some momentum.”

As yields decline and stocks rise, investors could start searching for direct investment opportunities in Greece. The country’s banking sector is looking to raise 10% of its capital needs to avoid being nationalized. DEPA and DESFA, two state-owned energy companies, are expected to sell shares to private investors this year as part of the country’s privatization program.

Financial investors’ interest in Greece is “a demonstration of confidence, which needs to be matched by capital,” said George Stamas, a co-founder of The Hellenic Initiative, a Greek diaspora-led non-profit that’s setting up a growth-equity fund to support small and mid-sized businesses in Greece.