Monday 19 February 2018

BoI backer eyes up hot Greek deals

Prem Watsa's firm, which is sitting on a huge profit after snapping up Bank of Ireland shares in 2011, has spotted another bargain, writes Tom Stoukas

Tom Stoukas

BANK of Ireland director Prem Watsa's Fairfax Financial Holdings is now focusing on Greece, betting that the worst has passed for the recession-battered nation. The company is sitting on a 50 per cent profit on its 2011 punt on Bank of Ireland.

"In terms of the economy, the last four or five years have been very tough for Greece," Fairfax chairman and chief executive officer Prem Watsa said. "The economy has come down very significantly, unemployment is high. But on the other hand, we think that perhaps a bottom has been reached."

Fairfax said last Wednesday that it will invest about €164m in Eurobank Properties Real Estate Investment Co, as part of a share capital increase, bringing the Toronto-based firm's stake in the Greek property company to 42 per cent from 19 per cent

Mr Watsa said Eurobank Properties was raising money at the right time to take advantage of a "lot of opportunities in Greece".

The country's state-asset sales programme, which includes a large real estate portfolio, has the potential to generate "significant growth" from private investors.

"We think that the prospects in Greece for Eurobank Properties will be very significant in the next five years, perhaps the next 10 years," he said, without giving any forecasts.

Shares in Eurobank Properties have more than doubled since falling to a low in June 2012, when the Athens Stock Exchange General Index tumbled as inconclusive elections stoked fears about a possible euro exit for the Mediterranean country.

"The ASE has since gained 52 per cent.

Greece is now in its sixth year of recession, with unemployment at 27 per cent as it fired state workers, cut pensions and wages, and raised taxes. The economy has shrunk by about one-fifth since 2008. The European Commission forecast gross domestic product will contract 4.2 per cent this year.

Prime Minister Antonis Samaras has vowed to meet budget-cut targets, implement structural reforms and speed up state-asset sales to satisfy the conditions of a €240bn loan agreement with the euro area and IMF.

"Greece as a country is on a long road of stability and growth from the very difficult times that it's gone through," Mr Watsa said. "We think the Greek people have really had tremendous hardship in the last few years but we do believe it's now perhaps at the end of the tunnel and that its worst days are behind it."

In July 2011, Fairfax Financial, WL Ross & Co, and Fidelity Investments were among five institutions buying a combined 34.9 per cent stake in Bank of Ireland from the Government. Fairfax Financial holds a 9.9 per cent stake in the Richie Boucher-led bank.

The shares have risen about 50 per cent since the deal was announced. Mr Watsa was appointed as a non-executive director in June 2012. Taoiseach Enda Kenny is powering ahead with plans to exit Ireland's three-year bailout on time at the end of the year, with the Department of Finance forecasting economic growth of 1.3 per cent this year and 2.4 per cent in 2014.

"When we made our investment, the 10-year Irish bond rates were running at 13, 14 per cent," Mr Watsa said. "Eighteen months later they dropped to four per cent.

"A huge amount of foreign investment now has come back into Ireland. It wasn't at the time. So we see the same type of activity happening in Greece."

When asked about threats of political instability in Greece and the possibility of euro exit fears rekindling, Mr Watsa cited his experience in Ireland.

"When we invested in Ireland many people asked us why we put money into Ireland at the time.

"We try to understand the facts, we try to understand the company, we understand the people and we make our own decisions so we've done that in this case and I must say over the long term, we're very excited about the prospects for Greece."

©Bloomberg

Irish Independent

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