Joshua Franklin and Freya Berry Bern/London
GREECE’S deepening debt crisis prompted bankers to pause, not panic, yesterday, and though markets dropped sharply they held above previous crisis lows.
Euro zone stocks remained well ahead of where they were at the start of the year before the European Central Bank (ECB) started printing money, and while government borrowing costs shot up in Europe’s indebted southern countries – Italy, Spain and Portugal – they remained well below the heights scaled at the peak of the crisis in 2011/2012.
“I’m firmly convinced that we will not see an unravelling of the European integration,” Axel Weber, the chairman of UBS and former ECB board member told a Swiss banking conference in Bern.
“People all feel that there will be a rational solution. If I look at Europe, rational solutions always take a long time to come around. Usually in Europe these rational solutions aren’t found until two minutes before the Asian market opens.”
A clutch of German firms including real estate company Ado Properties and specialist lender PBB put their stock market debuts on ice after Greece inched closer to a default – but said they hoped to re-launch them later.
“Anything for this week, people will hold back. But it is holding back, rather than cancelling,” said a banker working on stock market flotations in London.
Delayed impact
Initial public offerings (IPOs) of Spanish cable firm Euskaltel and Swedish health care provider Capio were proceeding as planned after winning strong orders last week. But one investor said bad news from Greece could start to have an impact.
“I’m attending a meeting this week for another IPO, so roadshows are still going ahead,” said Neil Wilkinson, a European equities manager for Royal London Asset Management.
“I think it depends how long we keep getting hit by negative headlines hour after hour though as that’s the kind of environment when you will start to see people sitting on their hands and companies will struggle to get away, irrespective of the quality of the company or the specific deal pricing.”
Bankers advising companies on acquisitions said live deals were progressing despite the uncertainty because Greece constituted such a small part of the wider euro zone.
Belgian grocer Delhaize, which has 308 stores in Greece, was not immediately available to comment about whether the situation in the country could affect the pricing of its e25 billion (R304.5bn) merger with Dutch grocer Ahold.
Ahold was not immediately available to comment.
Delhaize said separately that sales had increased in Greece since the start of the year adding there were no supply issues and customers could still pay by cash or card.
Other deals at an earlier stage of planning are likely to be shelved as corporate boards wait and see what happens with Greece.
“The decision-makers will have to decide if they are comfortable taking on increased volatility, from the uncertainty of how a Grexit will play itself out,” said Luca Ferrari, co-head of European corporate advisory at investment bank Greenhill.
Reflecting the uncertainty, companies and banks have halted the sale of new bonds in Europe due to the Greek crisis. – Reuters