[LONDON] Global buyout houses and property speculators are stalling investment raids on Greece, spooked by the possibility that bargains could be snared for fractions of today's prices if the country quits the euro.
Two years ago, private equity firms like Blackstone and KKR were beating a path to Greece, seduced by depressed stock and property values and a European Central Bank promise to do whatever necessary to shore up the eurozone.
But now, with asset prices on a fresh downward spiral, investors say Greece's messy political outlook and uncertain future in the currency bloc has razed the appeal of such opportunities, sealing off a vital source of capital.
Levels of foreign mergers and acquisitions activity into Greece have fallen to their lowest since 1997, with just US$245.8 million of deals so far in 2015, Thomson Reuters data shows.
KKR's first Greek deal since at least 2005 has collapsed and a company Blackstone invested in has lost more than 14 percent in value.
And the longer bellwethers like these lick their wounds over bad Greek bets, the longer mainstream investors such as pension funds will keep the country on the blacklist. "The macro risks are too great and the likely timeframe for recovery is too long for most of the players in our space to view Greece as being worth the effort at this early stage," said Marc Mogull, managing partner of real estate private equity firm Benson Elliot Capital Management.
BC Partners' takeover of Athens-based pharmaceuticals company Pharmathen in June is the only private equity deal struck in Greece so far this year, but it is unclear when, and if, parties will be able to complete. The size of the transaction was not disclosed but the company had sales of 180 million euros in 2014.
Although the business generates around 90 percent of its revenues abroad, a source familiar with the deal said that BC Partners is in "wait and see mode" on the investment. "Everyone is just treating Greece as a big question mark," the source said.
The gap between signing and executing deals in Greece has also proven problematic for KKR, which agreed to buy 1.2 billion euros of loans from Greek bank Piraeus at the end of 2014.
But following the election of the leftist, anti-austerity Syriza government in January, the purchase was quietly cancelled in April, after "taking into consideration the recent developments," a statement on Piraeus's website showed.
Blackstone bought a 10 per cent stake in property developer Lamda for 20 million euros in July 2014. Lamda had signed an agreement to develop the site of the former Hellenikon airport but Syriza halted the plan, branding the sale of prime coastal property to Lamda as "scandalous".
Lamda's stock has fallen 14.3 per cent since Blackstone invested in July 2014 but losses could mount when trading on the Athens bourse, shut since June 26, finally resumes.
The stakes are equally high for another US investment firm, Oaktree Capital Management, after a series of big-ticket investments in Greece.
The group launched the Ikos brand of luxury resorts in Halkidiki and struck a shipping joint venture with Greek industry veteran Petros Pappas last year, when Greece-based, US-listed Star Bulk Carriers Corp issued around $653 million of stock to Oaktree and the Pappas family.
KKR, Blackstone and Oaktree declined to comment for this article.
Speculation about an exit from the eurozone is gathering pace as a final deadline for agreement between Greece and its creditors looms this weekend.
Greek assets would likely suffer a sharp depreciation in value if the former currency, the drachma, was reinstated, but when the dust settles and the repricing completes, international investors could flock to take advantage.
"With a return to the drachma, Greek business owners will have difficulty accessing capital," said Dimitris Paraskevas, managing partner at Greek law firm Elias Paraskevas. "So maybe they sell their business to an international and sit out a difficult decade. There are many family-owned companies which will take this route."
A depreciation could also make export-oriented companies attractive to investors, since expenses would be in drachma and sales in euros. Property prices would also likely fall, tempting some investors to swoop on villas and hotels that continue to benefit from Greece's resilient tourism industry.
"The asset class that continues to attract interest, despite the confusion at the moment, is tourism-related property and hotels," said Yannis Perrotis, managing director of CB Richard Ellis Atria, an Athens-based real estate advisory firm. "We also have some private investors - some from Europe or Greeks from the Diaspora, mostly based in the US, who are looking to buy opportunistically," Mr Perrotis added.
But with months of tough economic reforms on the horizon and Greek lenders down to their last few days of cash, a major investment drive is a way off yet. "I don't think Greece is investable in the near term," a senior London-based banker said. "It's not about investing or not, it's about what is survivable."
REUTERSRead more on the Greek crisis here