Investors demanded yields as GEK Terna is an over-leveraged company...
Full confirmation of the journalistic coverage by Banking News regarding a fiasco concerning the projected 500 million euro bond issuance by GEK Terna is provided by the briefing note of the Spanish bank Santander, although it hastily attempts to «sugarcoat» the picture. Essentially, the bank reports that the company backed down on the bond issuance that BN first revealed yesterday. It should be noted that the company has not made any announcement.
Despite the firm's efforts to label the withdrawal of the issuance (which the company has not yet announced) as an «indication of strength», the reality emerging from the data itself proves that the effort to raise capital from international markets evolved into a genuine fiasco.
And to explain: Santander claims that the decision of GEK Terna to withdraw from the Eurobond issuance was due to «market nervousness» and constitutes a move to protect shareholders.
However, the analysis itself reveals the deep contradiction in the argumentation of the Spanish firm:
Essentially, the firm admits that the company entered the market purely «opportunistically», and not out of a planned refinancing need.
It is also noted that the company withdrew from the issuance, and this shows strength.
Yet, when a group of such caliber tests the markets and is forced to back down, this is not perceived as «strength», but as a severe pricing and planning failure.
Furthermore, if GEK Terna truly possessed the negotiating superiority claimed by Santander, it would not have cancelled the issuance, which in exploratory contacts reached pricing near 6%, meaning annual interest near 29 million euros.
The stock remains in the 4.6 billion zone purely due to manipulation...
The truth is that international investors demanded yields because GEK Terna is an over-leveraged company.
Beautification
In its attempt to reassure investors and justify its outperform recommendation with the exceptionally optimistic target price of 62 euros, Santander attempts to downplay the stock market drop, characterizing it as «baseless» and a «buying opportunity».
This is the classic tactic of analysts attempting to salvage the narrative.
The negative reaction of the board was not accidental: investors punished the communication and operational failure of the borrowing attempt.
The question that arises: If the group's liquidity is so «abundant» (1.9 billion euros pro forma) and its profile so fortified, why was it chosen to expose the company to a failed market foray that damaged its investment image?
The figures cited by Santander (93% fixed interest rate, 3.8% average borrowing cost, inflation clauses on motorways, and maturities extending to 2032) indeed prove that the group had the ability to wait.
GEK Terna had no reason to rush into the markets this week, from the moment the 500 million euro bond matures in July 2027.
Why, then, the haste to execute an «opportunistic» issuance?
What BN wrote on October 22
Fiasco: GEK Terna postpones 500 million bond issuance, investors offered shock interest rate up to 5.8%
A temporary postponement in the bond issuance of GEK Terna amounting to up to 500 million euros was decided a short while ago, according to information from BN.
There was information that the issuance would start today, but prevailing market conditions led to the postponement.
It should be noted that from the very first moment the issuance was announced, there was concern since government bonds were under pressure, while corporate bonds followed the same trajectory.
Thus, analysts were saying that if it entered the markets it would be priced with an interest rate above 5%.
Indeed, some information indicated that the company was hoping for a 4.5% interest rate, but initial estimates were that investors were pricing it even above 5.5% and toward 5.8%.
Today the ten-year bond of France exceeded 5%.
Overall, GEK Terna has troubled investors as on the one hand it emphasizes that it has high liquidity, but on the other hand it moved to issue a bond under such conditions.
The stock, although closing with a marginal rise today, has been under heavy pressure recently.
From the 48 euros where it had stood, it has retreated below 39 euros.
Part of the decline is attributed to the fact that although the company claims it has high liquidity and makes extrapolations on debt excluding loans in concessions, shortly after the share capital increase, it had announced the issuance of a new bond loan in order to repay an old one.
Total borrowing is nevertheless high and has affected the trajectory of the stock.
How is the borrowing of the GEK Terna group structured?
1) Letters of guarantee of 1.9 billion euros (written commitment of banks)
2) New loan for the Northern Road Axis of Crete of 1.4 billion
3) Loan for Attiki Odos of 2.60 billion euros
3) Loan for Egnatia Odos of 1.039 billion euros
4) Loan for Nea Kentriki Odos of 391 million euros
5) Kastelli, Public-Private Partnerships (PPPs) in water supply, waste, HERON, TERNA construction, other operating activities... loans amounting to 644 million euros
6) Parent company loans of 1.345 billion euros
Sum of loans 9.3 billion euros
Non-consolidated holdings are not included in this analysis, as in that case borrowing increases even further.
The 4.1 billion of GEK Terna borrowing in misinformation press releases... in practice is 9.3 billion euros.
Why is a new bond needed?
The most basic question is reasonable.
Why would GEK Terna seek new capital through a bond issuance?
Is it facing cash flow pressures due to the increased requirements of the projects it implements, or is it a move of refinancing and managing its debt?
And, above all, is additional borrowing the appropriate solution when the investment program constantly demands fresh capital?
It is recalled that in 2025 GEK Terna had proceeded with a bond loan issuance of up to 500 million euros.
If it is now considering a new issuance, the management must explain what need is being met, where the new capital will be directed, and whether this financing enhances the group's financial flexibility or further increases its debt liabilities.
Giorgos Katikas
www.bankingnews.gr
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