Limited in­ter­est in ex­er­cis­ing Al­pha war­rants

Financial Mirror (Cyprus) - - FRONT PAGE -

The re­sults of the sec­ond ex­er­cise pe­riod of Al­pha Bank’s war­rants showed that 60.9 mln war­rants were ex­er­cised at the pre­de­fined price of 0.4576 eu­ros.

Since each Al­pha war­rant in­cor­po­rates the right to pur­chase 7.41 shares from the Hel­lenic Fi­nan­cial Sta­bil­ity Fund (HFSF), 451 mln shares pre­vi­ously held by HFSF were trans­ferred to pri­vate in­vestors.

This cor­re­sponds to 3.53% of to­tal out­stand­ing shares, im­ply­ing that the HFSF stake in the bank’s share cap­i­tal was re­duced from 69.9% to 66.37%. HFSF pro­ceeds amounted to 206.5 mln, im­ply­ing a 7.9 mln cap­i­tal gain.

In the first ex­er­cise pe­riod last De­cem­ber, 28.8 mln war­rants were ex­er­cised cor­re­spond­ing to 213 mln shares trans­ferred from HFSF to pri­vate share­hold­ers. At that time, HFSF pro­ceeds stood at 95.8 mln, with cap­i­tal gains of 1.9 mln.

War­rants were granted for free to all pri­vate share­hold­ers who par­tic­i­pated in the bank’s cap­i­tal in­crease last year and the eq­uity rais­ing was car­ried out at an is­sue price of 44c, equal for pri­vate in­vestors and the HFSF.

War­rants, which are also traded on the ASE, may be ex­er­cised ev­ery six months for the next 4.5 years af­ter their is­sue date in June 2013. The last ex­er­cise pe­riod is on De­cem­ber 10, 2017.

The ex­er­cise price is pre­de­fined and equal to the is­sue price (44c) with an in­ter­est rate of 3% in­creas­ing by 1% a year. Thus, HFSF po­ten­tial cap­i­tal gains are capped to 4% for the first year of ex­er­cise, 9% for the sec­ond year, with the high­est re­turn at 26% at the end of the last ex­er­cise pe­riod.

In con­trast, war­rant hold­ers’ po­ten­tial gains do not have any ceil­ing. As an ex­am­ple, in­vestors who par­tic­i­pated in last year’s cap­i­tal in­crease and de­cided to ex­er­cise their war­rants in the sec­ond pe­riod re­alised cap­i­tal gains close to 60%.

The HFSF can­not di­vest the shares cor­re­spond­ing to the out­stand­ing war­rants for a 3-year pe­riod. Af­ter that date, HFSF can dis­pose its shares pro­vid­ing the right of first re­fusal to war­rant hold­ers.

Al­though the num­ber of war­rants ex­er­cised in the sec­ond pe­riod was more than dou­ble com­pared to the pre­vi­ous pe­riod, the to­tal ex­er­cised war­rants so far (90 mln) is just a frac­tion (less than 8%) of the out­stand­ing num­ber of 1.14 bln. The lat­ter cor­re­sponds to 8.47 bln shares cur­rently held by HFSF.

Un­like the other two banks (NBG and Pi­raeus), Al­pha’s war­rants are deep in the money with the cur­rent share price of 72.5c im­ply­ing a 58% upside from the last war­rant ex­er­cise price 45.76c.

Nev­er­the­less, the lack of in­ter­est in war­rant which is more pro­nounced in Al­pha’s case sig­nif­i­cant po­ten­tial gains, has trig­gered HFSF other means of dis­pos­ing its banks share­hold­ings. ex­er­cis­ing, given the to ex­plore

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