Coca-Cola Quits Athens: What Does This Mean for Greek Economy?

Coca-Cola Hellenic Bottling Co. SA is quitting the Athens stock exchange next year, cutting the capitalization of the already devastated Greek market by roughly a quarter.

The company’s departure will cut the value of equities listed in Athens from $39.2 billion to just $31 billion, according to Bloomberg. Coca-Cola HBC, based in the Greek capital, currently accounts for 23 percent of the benchmark ASE Index’s weighting with a value of 6.23 billion euros. The Greek market has lost 86 percent of its value since peaking in November 2007 at $273 billion.

Coca-Cola HBC will instead try to list on the London Stock Exchange. A new company established in Switzerland by one of the bottler’s main shareholders will make a share-exchange offer for the company and seek a primary listing on the LSE, making it eligible for inclusion in the benchmark FTSE 100 Index. The firm will also seek to list in New York.

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Coca-Cola Co. (NYSE:KO) has numerous bottlers around the world, of which Coca-Cola HBC is the second largest. It operates in 28 countries across three continents and employs over 40,000 people, generating sales last year of 6.9 billion euros. “On the stock-exchange level, it’s around 10 percent of transactions, which implies a loss of earnings for the Hellenic Stock Exchange,” Jason Manolopoulos, director of Dromeus Capital Management and author of Greece’s Odious Debt, told Bloomberg.

Coca-Cola HBC’s decision to move may have been spurred by having its credit rating cut twice in June, by both Standard & Poor’s and Moody’s Investors Service. In downgrading the company from A3 to Baa1, Moody’s cited the economy and concern about the potential impact of turmoil in Greece. Standard & Poor’s cut the company’s debt rating from A to BBB+.

Coca-Cola HBC Chief Executive Officer Dimitris Lois confirmed in a Bloomberg Television interview on Monday that the ratings downgrades did play a role in the company’s decision to move, as did Switzerland’s “stability both in the economic environment and regulatory environment.”

“The decision was triggered by the concerns from our investors with regards to the liquidity, so obviously we have addressed the liquidity by listing on the London Stock Exchange,” Lois said. “The second element was the downgrade from the two rating agencies. With these downgrades, the cost of potential borrowing was going up.”

Coca-Cola HBC’s departure doesn’t just leave Greece without its most valuable publicly-traded company, but signals further deterioration of the country’s ability to support major corporations. The government will have to actively work to prevent more companies from following Coca-Cola HBC to greener pastures. And if it can’t succeed at that task, Greece’s tools for economic recovery will be further limited.

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