Greece Bundles Four IMF Payments into One; Investors Eye Greece's Long-Term Potential
RICHARD QUEST, CNN HOST (voice-over): NASA is ringing the closing bell. That's one of the astronauts who's been on the space shuttle and up to the space station. Something tells me we're not going to get a wimpy gavel here. We didn't. The market is closed. It is Thursday. It's the 4th of June.</s>QUEST (voice-over): Tonight:</s>T. BOONE PICKENS, FOUNDER AND CHAIRMAN, BP CAPITAL: Is it wrong? Is it right? It's what it is.</s>QUEST (voice-over): It is what it is, says T. Boone Pickens, who tells me oil is still the game for him on the eve of the OPEC meeting. I'm Richard Quest in New York where, of course, I mean business.</s>QUEST: Good evening. Greece has a new deadline to pay back the IMF. Only a few hours ago, Athens asked the International Monetary Fund to be allowed to bundle its June repayments, thus pushing the due date back to the end of the month. Greece was scheduled to pay more than $300 million. Join me at the superscreen and you'll see when the money was all meant to be paid. Now it was meant to pay $336 million on Friday along with three other major payments, which was meant to be here, $379 million, $379 million -- a variety of payments, all were meant to be paid during the month of June. And now all these payments have been rolled into one massive payment of $1.8 billion that will be paid or should be paid, intended to be paid on June the 30th. The move to bundle the debt is allowed under IMF rules. It's a rule that is very rarely used. In fact, it was 1970s that it was first put into place. Before the bundling announcement was made, Germany's chancellor told CNN regardless to what happened on payments, that Greece needs to make the harsh economic reforms to stay in the Eurozone. Angela Merkel sat down with our own Fred Pleitgen. And Chancellor Merkel told him a solution to the crisis -- remember, it's this very crisis, unlocking that, that will provide more money to Greece, that will allow them to make these debt repayments, that both sides needed to have big efforts. Fred sent us this report from Berlin.</s>FREDERIK PLEITGEN, CNN CORRESPONDENT: Richard, Chancellor Angela Merkel showed herself to be very concerned about the situation in Greece and the prospect of Greece possibly defaulting on its debt. Now she says that's going to be a major topic at the G7 summit, which, of course, she will host here in Germany. Now she says that the main Eurozone countries are going to have to be flexible when dealing with Greece. But she also said that it is the Greeks that are going to have to put in place those very harsh reforms.</s>ANGELA MERKEL, CHANCELLOR OF GERMANY (through translator): Of course to find a solution -- and I want a solution just like all my European colleagues -- we need big efforts by both sides. We, the partners from the Eurozone, have to show solidarity and I am glad the IMF is also engaged. At the same time, Greece has to be willing to undertake the necessary reforms because, in the end, a country brings itself on a growth course by its own efforts. And we have other European countries that have undertaken harsh reforms, like Ireland. They went through such a program and now have the best growth in the Eurozone. That is the kind of course Greece needs to get on. And that is why it is tough negotiations, but they are clearly aimed at keeping Greece in the Eurozone.</s>PLEITGEN: And of course, Richard, finding a long-term solution to this whole problem of Greek debt to the Greek economy, that's something that, of course, Angela Merkel and many other Eurozone leaders are aiming to do. But the big question, as we've talked about so many times, is what is the best way to do that. The Germans, of course, want the Greeks to increase VAT. They want structural reforms. They also want the Greeks to get real about pension reform as well. But of course there is a backlash from the Tsipras government; they're not sure how much they can actually sell to their people. So certainly it still is a very difficult situation. And that's something that Angela Merkel reflected today as well -- Richard.</s>QUEST: And, Fred, one quick question: I beg your pardon. My -- forgive me. I thought there was room with me, but he's not at the moment. Thanos Vamvakidis is the head of the European G10 Foreign Exchange Strategy for Bank of America Merrill Lynch Global Research. He is live for us in London now. We look at what was announced. We look at what was announced today but with the idea of the bundling up. How significant is that? And how much of this bundling up is purely designed to prevent having to pay until the end of the month?</s>THANOS VAMVAKIDIS, EUROPEAN G10 FOREIGN EXCHANGE STRATEGY, BANK OF AMERICA MERRILL LYNCH GLOBAL RESEARCH: Clearly this was a matter of inevitably, given the delays that we had so far in the negotiations. Greece had the money to repay the IMF tomorrow. But they didn't have the money to repay the IMF in mid-June and there was no way they can have a deal by mid-June in order to receive more official funding. So at this stage, it's actually good news that they requested to move all the payments to the end of June and the IMF has accepted it. The important thing is to take advantage of this delay and in the next three weeks, seven agreement (ph).</s>QUEST: Now the -- OK. But the bundling as such, not being used since 1970s with Zaire (sic), it's an extremely -- it's a rare operation. It sends the message -- what I can't understand, is it saying the message, we haven't got the money or we have got the money but we're going to put pressure on you that we think we can get a better deal by ratcheting up the pressure? Which do you think it is?</s>VAMVAKIDIS: It is just the result of the fact that we will support we have a deal back in April, then in May and we still don't have a deal. It is better from this point of view to move the payments to the end of June rather than have any suggestion in which there is -- which have missed an IMF payment. If there is a deal in the meantime, honestly nobody would care but the payments have been moved.</s>QUEST: Right. But if there is --</s>VAMVAKIDIS: But it is important to have a deal.</s>QUEST: Right. But you see, this is the problem, because if they haven't managed to get a deal with a $300 million payment on Friday, and knowing that the other deals or all the other payments are expected during the month, why do you think that there is more chance of getting a deal by the end of the month? They haven't managed it so far.</s>VAMVAKIDIS: That's indeed a very good question. We do have two proposals on the table, one from the European side and one from the Greek side. The two proposals are far apart and in order to be able to agree by the end of June and avoid a Greek default, everything has to go right from now on. They need to agree most likely by the end of next week. Then the Greek parliament has to approve it. The European parliament still have to approve it. And most likely the Greek side will have to implement some of the parallel (ph) actions in order to get funding at the end of June. And let's not forget, at the end of June is not only the deadline of the IMF but the current program ends, which makes it very difficult for the ECB to continue following the Greek bonds without an agreement in the meantime.</s>QUEST: In a word, is it your understanding that a deal is imminent?</s>VAMVAKIDIS: Not so far. The two sides are far apart and we need substantial compromises from both sides in order to have an agreement.</s>QUEST: Thank you, sir. Thank you for helping us understand our way through this. European shares closed the day lower. The DAX in Frankfurt was up more than half a percent. London's FTSE also ended the session down more than 1 percent. And a similar picture in Athens; but of course the roller coaster, Athens, over the past few days has been quite extraordinary. And many investors are now running away from Greece, fearing the economy is going to take years to recover if indeed it ever does. There are those who are embracing the unknown, seeing it as a value play. Clare Sebastian met two such investors, who are waiting in the wings to profit from a turnaround.</s>CLARE SEBASTIAN, CNN CORRESPONDENT (voice-over): Entering stage right: Hans Humes, CEO of Greylock Capital, an investor in Greece since 2011, he now has around $1 billion, mostly in bonds and some stocks.</s>HANS HUMES, CEO, GREYLOCK CAPITAL (voice-over): Our business is about buying cheap and selling more expensive and things Greek have certainly gone pretty cheap.</s>SEBASTIAN (voice-over): And entering stage left, Meb Faber of Cambria Investment Management. He bought into Greece last year at much smaller levels. He now has around $9 million invested in stock.</s>MEB FABER, CAMBRIA INVESTMENT MANAGEMENT (voice-over): There's a Greek quote from the famous investor, John Templeton. He says, don't tell me where things look best. That's the wrong question. Tell me where things are most miserable.</s>SEBASTIAN (voice-over): Two men who searched for high returns has made them minor players in a debt crisis unfolding many miles away in Athens, Brussels and Berlin. They're not content to be spectators despite the very real risks.</s>FABER (voice-over): We've been largely wrong. The Greek stock market has continued to go down over this period.</s>SEBASTIAN (voice-over): As Greek stocks fell by a third in the past year, Faber held his ground.</s>FABER (voice-over): Greek stock market could go up a lot. We're talking about 50 percent, 100 percent, even 200 percent over the next 10 years, 5- 10 years, and do really well. But you have to have a really long-term point of view.</s>SEBASTIAN (voice-over): Hans Humes knows better than most the value of a long-term view. He was part of the team that choreographed the Greek private debt restructuring in 2012.</s>HUMES (voice-over): I think the chance of there being any further haircut imposed is infinitesimal.</s>SEBASTIAN (voice-over): When Greek bonds recovered after 2012, he made money. Now he's sticking to the same script.</s>HUMES (voice-over): Sovereign debt doesn't go to zero, most by definition. So it could get ugly. But I don't think we'll lose effort.</s>FABER (voice-over): Our favorite is to go from truly miserable just to slightly less bad. That's where some of the strongest returns can come.</s>SEBASTIAN (voice-over): As this crisis has unfolded, most of the financial community has taken its seat right here in the audience, watching and reacting to every little event on the stage. For those who decided to get up and participate, they say the trick is to stay calm and wait because not even the most shrewd of investors know how this particular drama will end - - Clare Sebastian, CNN, New York.</s>QUEST: Now one note of clarification I think I misspoke when I said it was of course, Zambia in the 1970s that used the procedure in the IMF to bundle payments up. And indeed, it's believed to be the only time that that procedure, which was approved by the executive board, it's the only time apparently it has been used. T. Boone Pickens in the 1950s drilled his first oil well. So he certainly knows a thing or two about what the price of oil might do in the weeks and months ahead. He joined me earlier today to give us his views on the OPEC meeting.