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From the sidelines, Chinese companies start to eye Greek deals

Tuesday, June 30, 2015 - 17:41
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As the risk of Greece leaving the eurozone looms larger, Chinese companies are making tentative assessments of potential buying opportunities in the country, according to banking sources.

[HONG KONG] As the risk of Greece leaving the eurozone looms larger, Chinese companies are making tentative assessments of potential buying opportunities in the country, according to banking sources.

China Premier Li Keqiang assured European leaders on Monday that the country wants Greece to remain in the currency area and urged international creditors to reach an agreement on its debt.

But Chinese companies, though keen not to repeat mistakes they made in their flurry of during the 2008 financial crisis, are cautiously scouting out what bargains may be on offer if Greece leaves the bloc.

"They are looking at opportunities, waiting for the right moment to strike," one senior Hong Kong-based M&A banker who regularly advises Chinese buyers told Reuters.

Chinese firms have been snapping up European assets this year, spurred by on by the slide in the euro, which has fallen almost 20 per cent against the dollar in the past 12 months.

With US$18.9 billion worth of deals done so far in 2015 according to Thomson Reuters data, Chinese companies are on track to break their 2008 European M&A record of US$19.2 billion.

However they have largely stayed away from Greek assets, opting to stay on the sidelines while Greece and its European partners sparred over its debt obligations.

The country's airports, ports and power utilities would be attractive targets though if Greece left the euro, the banker said, as a resulting devaluation in its currency would spark a fall in asset prices.

Hong Kong-based Friedmann Pacific Asset Management Ltd, which acquired a 49 per cent stake in French airport Toulouse earlier this year, said the company is on the look out for possible investments in Greek airports.

"We are still interested in exploring the opportunities in Athens while carefully monitoring the market situation," a company spokeswoman told Reuters in an email statement.

Fosun's 2011 purchase of a 9.5 per cent stake in Folli Follie for an undisclosed amount is the only Chinese acquisition in Greece, according to Thomson Reuters data. China's state-owed COSCO Group has been in advanced discussions about buying a majority stake in Greece's largest port Piraeus, though a final agreement has not been reached yet.

For Chinese banks, shipping is the main sector where they have exposure to Greece, though lenders are diverging on whether to increase their financing of the industry.

China Development Bank (CDB) raised the bar for approval of Greek deals last year and stopped approving shipping ones for a while because of concern over the country's creditworthiness, an individual with direct knowledge of the matter said.

CDB was not immediately available for comment.

But other policy banks are pushing forward with Greek shipping deals.

"We just quoted to a policy bank on a ship financing transaction with Greek interests, so I suspect they're not that concerned with the situation in Greece," Nigel Ward, partner at law firm Berwin Leighton Paisner who works closely with Chinese banks and Greek ship-owners, said.

Still, Chinese government officials say that while the Greek turmoil will present the country with buying opportunities in Europe as a whole, they will be mindful of the political implications of rushing into Greece if it does leave the eurozone.

"There are many assets and economies that we can choose, why should we step into the muddy water of Greece?," a government advisor, who declined to be named, told Reuters.

REUTERS

Read more on the Greek crisis here