More Greek Deals

Details on those other Greek debt deals
Posted by Tracy Alloway on Feb 25 15:38.

Goldman’s been getting plenty of heat over the currency swap it arranged for Greece.

But the swap itself is not the only issue here. Securitisation also plays a factor and it seems Titlos — the special purpose vehicle (SPV) created to securitise the swap — is not the only Greek debt-concealing securitisation deal undertaken by the Hellenic Republic.

The FT has mentioned that banks including Morgan Stanley and Deutsche arranged transactions that also enabled the Greek government to raise cash for budget spending without having to label the proceeds as public debt. In particular, they cite a securitisation in which Greece raised €2bn backed by grants the finance ministry expected to receive from European Union structural funds.

The New York Times alluded to a few others in its recent story on the Goldman-Greece issue:

In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.

Indeed, it seems Greece went on a state asset-securitising spree in a fit of mythologically-named deals between 2000 and 2001. The deals are:

Aeolos SA (2001) – A €355m securitisation backed by air traffic control fees owed to Greece by airlines. The deal was managed by Morgan Stanley, Alpha Bank and EFG Eurobank, according to a 2001 article from EuroWeek.

Ariadne SA (2000) – A €650m deal backed by cashflow from OPAP — the state lotteries. The arrangers were Morgan Stanley Dean Witter, Schroder Salomon Smith Barney and UBS, according to a 2000 story from EuroWeek. Alpha Bank and Commercial Bank were joint leads.

Atlas Securitisation SA (2001) – That €2bn deal backed by European Commission (EC) payments under the third Community Support Framework EC-Greek development plan. That one was jointly lead managed by BNP Paribas, Deutsche Bank, EFG Eurobank and NBG International, according to a 2001 story from EuroWeek.

How did the securitisations help conceal Greece’s debt?

The Evil B’s Bitter Pill blog explains it simply:

But in Greece, the financial wizardry went even further. In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country’s airports and highways to raise much-needed money. The arrangement they called “Aeolos”, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called “Ariadne” . . . devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics.

These kinds of deals have been controversial within government circles for years. As far back as 2000, European finance ministers fiercely debated whether derivative deals used for creative accounting should be disclosed. The resounding answer was hell no. But in 2002, accounting disclosure was required for many entities like Aeolos and Ariadne that did not appear on nations’ balance sheets, prompting governments to restate such deals as loans rather than sales. Of course, Greece did not see the need to restate such deals because they were executed before the 2002 rule change.


In a statement issued on Thursday, Eurostat, the body charged with collating eurozone statistics, said it asked Greece in 2002 to reclassify the securitisations according to the new accounting guidance.

Conspicuously absent from the statement: Greece’s response to the body’s 2002 request.

And why Eurostat didn’t chase them up on it.