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Why almost all GEK TERNA loans are in Special Purpose Vehicles (SPVs) - What risks are they trying to isolate?

Greece SSM SPV ECB Special Purpose Vehicles loans GEK TERNA tags :
Why almost all GEK TERNA loans are in Special Purpose Vehicles (SPVs) - What risks are they trying to isolate?
Special purpose vehicles are created to isolate risks from the parent company or to transfer risks to third parties, in this case banks, according to certain project finance standards
That GEK TERNA is an over-indebted company is recognized by the entire investment and stock market. That Greek banks are audited by the SSM, the ECB Supervisory Mechanism, regarding loans granted to major corporations on the occasion of GEK TERNA is also well known. What causes surprise is that almost all loans of GEK TERNA are held in Special Purpose Vehicles or SPVs. Special purpose vehicles are created to isolate risks from the parent company or to transfer risks to third parties, in this case banks, according to certain project finance standards.

Instead of borrowing being held at the group level, e.g., GEK TERNA, we see that the Northern Road Axis of Crete is in an SPV. The Egnatia Odos highway borrowing is in an SPV. The Power Plant in Komotini likewise, alongside a multitude of other projects that have received loan financing.

Ending the practice of Special Purpose Vehicles once and for all – More transparency

Special purpose vehicles possess a hazy legal status, protecting the parent company if a project does not perform well or mitigating risks for the parent company. Some will say that SPVs are companies belonging to GEK TERNA, but why GEK TERNA did not take out the loan directly and instead placed it in a special purpose vehicle—does that not raise questions? Obviously because GEK TERNA and every company choosing this hazy practice want to ensure that their balance sheet will not be affected, in short transferring risk elsewhere. These are accounting tricks that the Greek legislator must re-evaluate, because financial transparency takes precedence.

What will happen if a project is not completed? What will happen if a concession contract is blocked by a future political decision? What will happen if a loan connected to an SPV cannot be repaid? All these are serious questions, and accepting SPV tactics is akin to accepting tactics of a hazy landscape. The question is simple: why are corporate groups in Greece built this way through Special Purpose Vehicles, what risks do these companies run, and who pays the damage if and when it arises?

How is the debt of the GEK TERNA group structured?

  1. Letters of guarantee of €1.9 billion (written commitment from banks)

  2. New loan for the Northern Road Axis of Crete of €1.4 billion

  3. Loan for Attiki Odos of €2.60 billion

  4. Loan for Egnatia Odos of €1.039 billion

  5. Loan for Nea Kentriki Odos of €391 million

  6. Kastelli, Public-Private Partnerships (PPPs) for water supply, waste management, HERON, TERNA Construction,other operating activities… loans amounting to €644 million

  7. Loans of the parent company of €1.345 billion

Sum total of loans: €9.3 billion.

This analysis does not include holdings that are not consolidated, as in that case borrowing increases even further,impacting Greek corporate debt.

www.bankingnews.gr

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