Greek Fund Aims to Breathe Fresh Life Into Troubled Micro Firms

(Bloomberg) -- Nikolaos Karamouzis has honed his knowledge of Greece's crisis-stricken economy over more than three decades in finance and perhaps sees investment opportunities where others fear to tread.

The former banker is putting together a fund to invest in some of the struggling small and medium-sized enterprises that still play a critical role in the Greek economy, providing six out of 10 jobs -- twice the European Union average. Many are weighed down by soured loans but Karamouzis believes some retain significant potential if money is targeted in the right places.

“The crisis has left behind a huge problem in the backbone of the Greek economy,” Karamouzis said in an interview. Some 3,500 small and medium businesses have non-performing loans worth more than 20 billion euros ($22 billion), added the 67-year-old, who is also a former Bank of Greece official and has a doctorate in economics from Penn State university.

“An investment opportunity today in Greece is to look at the SME universe and identify companies that are facing problems but still have a business story and potential, as long as someone manages to successfully turn them around,” he said.

Karamouzis is teaming up with private-equity experts and experienced managers to create the SMERemediumCap fund and they want to secure 100 million euros in private funds by the end of this year. To get things started, they're planning to buy as many as 10 companies out of a total of 160 that they have identified as having potential.

“We expect the first two deals to finalize in the first half of 2020,” said Karamouzis, president of Grant Thornton Tax and Business Advisory Solutions in Greece. Kostas Karafotakis, the former head of investment firm Olympia Group, and Theodoros Moschos, previously a top manager at construction company Ellaktor SA, are also playing leading roles in the fund.

To be sure, getting Greece's economy back on its feet won't happen overnight. In the last decade, the nation's gross domestic product has shrunk by about a quarter, partly due to the woes of SMEs. The sector still generates 63.6% of value added and 85.2% of employment, according to the European Commission, exceeding the European average of 56.8% and 66.4%, respectively.

New Management

Karamouzis's project is also backed by Greece's four major banks, as well as businessmen and institutions like the Onassis Foundation. The European Bank for Reconstruction and Development may also participate.

Most of the companies that the fund is targeting made significant investments before the crisis funded by bank loans. As the Greek economy imploded, sales collapsed and many were unable to repay their debts.

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SMERemediumCap aims to restructure those liabilities, inject fresh money and install managers who will have a financial stake in the enterprise.

“Current shareholders can also participate,” Karamouzis said. “We won't do aggressive buyouts and neither we will trade bad loans. We want to invest in their products and make the businesses viable again.”

The focus is on companies in sectors such as frozen seafood, egg production, light manufacturing, food and beverages, building materials, hospitality, retail networks and wholesale.

Create Jobs

Many of these are too small to attract investment from outside Greece. “But we will work with foreign investors wherever there is interest to do so,” Karamouzis said.

One of the main campaign pledges of Greek Prime Minister Kyriakos Mitsotakis, who was elected in July, was to attract investment and create new and well-paid jobs. The Greek economy is expected to expand by around 2% this year and for 2020 the government projects 2.8%. The country's creditors and other institutions are less optimistic.

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SMERemediumCap's aim is for companies to lift sales to pre-crisis levels and keep the economy supplied with goods that would otherwise need to be imported, Karamouzis said.

“We want to support production in Greece, create new jobs and boost economic output in general,” he said. “It is expected that 5,000 to 10,000 jobs could be created through our project.”

To contact the reporter on this story: Sotiris Nikas in Athens at snikas@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net, Iain Rogers, Paul Tugwell

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