As short-term bonds, Soros likely purchased them at, say, a 10% discount from par, not 90% as the comment to the CNBC article surmises. Because of the lower risk of short-term bonds, Soros, or any other buyer, could have hypothecated them for, say, 90% margin credit. That is probably the source of the $200 million figure. That’s how much cash Soros has into the purchase.
Bonds are usually bought at a coupon rate discount to par / value at maturity.
I am sure that when they say Soros bought bonds at a discount, they meant that it was in addition to “normal” market price of the bonds, because of the large sum (about $2B par value) and urgency (to cancel repo contracts and provide liquidity to bankruptcy court), as well as a very limited market for this tranche of bonds (due to the nature of the current sovereign risk and, again, relatively large sums involved).
With the rates on short-term sovereign euro bonds already high, getting 10+% total discount (about $200M in profit, as combination of coupon rate plus discount to market price of bonds) over relatively short period of time should be a no-brainer for anybody who has this kind of liquidity and can stand the risk of sovereign default.
Having easy access to the bond market, to sell bonds at retail market prices if they appreciate quickly as rates drop (current European headline risk-on/risk-off trade volatility is very high) is certainly a bonus and he can take profits as a capital gain.
When Soros “broke the Bank of England” (he didn’t, it was always a hyperbole) betting on the plunge of pound sterling, he made $1B profit over few months, but it was a group making a $20B short currency arbitrage bet, of which his part was $10B so it was only a 10% profit. Stanley Druckenmiller, who worked for Soros at the time, was actually the one who realized and provided the basis for the trade.
As impressive as $1B usually sounds, it was only about 10% gain (had he borrowed some of it, he would have gained more from leverage). Admittedly, it happened over relatively short period of time (few months), but also at the time when interest rates on pound were much higher than today, and this kind of percentage return in the more volatile stock market wouldn’t be considered unusual.
There are not a lot of opportunities to deploy large amounts of money for almost guaranteed double-digit profit. At times of distress it’s time of the opportunity to invest.
Similar thing was done by Warren Buffett with Goldman Sachs in 2008 and, more recently, with Bank of America. Several hedge funds sometimes known as “vulture investors” (Wilbur Ross, Alec Gores, Tom Gores / Platinum Equity, Leucadia National et al) are specializing in distressed properties, whether equities or debt. Some of them were offered the same deal as Soros, through Dutch Auction, but they passed up on higher bids for whatever reasons.