EBRD, US funds eye half of BOCY € 1 bln cap is­sue

Financial Mirror (Cyprus) - - FRONT PAGE -

The Bank of Cyprus board de­cided af­ter a marathon 12-hour meet­ing on Mon­day to of­fer 4.17 bln new shares in a pri­vate place­ment to in­sti­tu­tional in­vestors with the aim of rais­ing about EUR 1 bln in fresh cap­i­tal and boost­ing its liq­uid­ity ra­tio by more than four per­cent­age points.

The Euro­pean Bank for Re­con­struc­tion and Devel­op­ment (EBRD) and a group of in­ter­na­tional in­vestors headed by Amer­i­can bil­lion­aire Wilbur L. Ross, are ex­pected to sub­scribe to 52% of the cap­i­tal in­crease, with the EU-owned bank say­ing it will in­ject some 120 mln eu­ros and the other in­vestors the re­main­ing 400 mln.

Af­ter agree­ing on July 15 to seek new in­vestors, the bank an­nounced the suc­cess­ful pri­vate place­ment of 4.17 bln new or­di­nary shares at 24c each, of­fered to new in­vestors and ex­ist­ing share­hold­ers. Ex­ist­ing share­hold­ers cur­rently hold some 4.7 bln shares.

It said the plac­ing “was com­fort­ably over­sub­scribed” and al­lo­cated to a broad range of in­sti­tu­tional in­vestors from Europe, North Amer­ica and Rus­sia, in­clud­ing a num­ber of in­ter­na­tional in­vestors in­tro­duced by WL Ross & Co LLC and the EBRD.

Ross re­cently in­vested in the re­cap­i­tal­i­sa­tion of Greece’s Eurobank in April with fel­low Bank of Ire­land in­vestor Fair­fax Fi­nan­cial. He has also spo­ken of ex­plor­ing op­por­tu­ni­ties in Italy, Por­tu­gal and Spain.

The bank added that the clos­ing of the plac­ing is sub­ject to a “claw­back” of up to 20% in favour of ex­ist­ing share­hold­ers, sub­ject to an ex­tra­or­di­nary gen­eral meet­ing next month.

The sec­ond of­fer to ex­ist­ing share­hold­ers will be avail­able for 15 days start­ing July 31 for a min­i­mum of­fer of 100,000 eu­ros.

The new shares will be un­listed at the time of is­sue, but the bank said it “in­tends to pro­ceed with the list­ing for the en­tire class of its or­di­nary shares on the Cyprus Stock Ex­change and the Athens Ex­change as soon as rea­son­ably prac­ti­ca­ble ... be­fore the end of the year.”

The CSE said the stock sus­pended in Oc­to­ber as well, bank time to re­solve its share re­turn to the mar­ket.

The bank said it will also of­fer an ad­di­tional 100 mln eu­ros of new or­di­nary shares to all ex­ist­ing share­hold­ers, thus al­low­ing cur­rent stake­hold­ers to min­imise the losses from a di­lu­tion of their share­hold­ing. will re­main to al­low the reg­is­ter and

HSBC and Credit Suisse acted as lead plac­ing agents, with Deutsche Bank and VTB Cap­i­tal act­ing as co-lead plac­ing agents. The bank’s sub­sidiary CISCO was the lo­cal plac­ing agent.

The bank said that af­ter the cap­i­tal rais­ing, its Com­mon Eq­uity Tier 1 ra­tio is ex­pected to rise from 10.6% by more than four per­cent­age points to 15.1%, thus pro­vid­ing a safety cush­ion prior to the Europe-wide stress tests in Oc­to­ber.

“The fact that high cal­i­bre in­sti­tu­tional in­vestors were in­ter­ested and par­tic­i­pated suc­cess­fully in this ex­er­cise is a tes­ta­ment to their con­fi­dence in the bank and also in the econ­omy of Cyprus,” said Chair­man Chris­tis Has­s­apis.

The place­ment was hailed by many stake­hold­ers, in­clud­ing the Cyprus In­vest­ment Funds As­so­ci­a­tion (CIFA) that said that this will help re­store con­fi­dence in the bank, af­ter the govern­ment re­cently suc­cess­fully re­turn to the mar­kets with its first euro bond is­sue in more than three years.

The bank’s CEO, John Houri­can, added “we are de­lighted with the qual­ity of in­vestors and the broad in­vestor base in­clud­ing in­ter­na­tional in­vestors in­tro­duced by WL Ross, the EBRD as well as other in­sti­tu­tional in­vestors which we be­lieve have a long-term view. We are pleased to wel­come them as new share­hold­ers and we ap­pre­ci­ate the con­tin­ued sup­port of our ex­ist­ing share­hold­ers.”

“In co-op­er­a­tion with the se­nior man­age­ment of the Bank of Cyprus, we were pleased to as­sist with the in­tro­duc­tion of in­ter­na­tional in­vestors who are com­mit­ted to buy­ing about 40% of this place­ment,” added Wilbur L. Ross, Founder and Chair­man of WL Ross & Co. LLC.

The Fi­nan­cial Mir­ror had ear­lier re­ported that US-based hedge funds were keen to grab more than half of the of­fered cap­i­tal in­crease, ex­press­ing an in­ter­est to sub­scribe to 54% of the cap­i­tal in­crease and thus a ma­jor­ity con­trol of the board, while another hedge fund has sub­mit­ted a bid of 30 cents a share, that in it­self would cover the en­tire new cap­i­tal and again seek board con­trol.

In an an­nounce­ment on Tues­day, the EBRD said it will in­vest up to 120 mln eu­ros in Bank of Cyprus, as part of the cap­i­tal raise which is sub­ject to a claw­back of up to 20% by ex­ist­ing share­hold­ers and cer­tain con­di­tions, in­clud­ing the pass­ing of share­holder res­o­lu­tions at a forth­com­ing ex­tra­or­di­nary gen­eral meet­ing.

“Through this in­vest­ment, the EBRD is ac­tively en­gag­ing in sup­port­ing the im­ple­men­ta­tion of the on­go­ing re­struc­tur­ing plan and the sta­bil­i­sa­tion of the bank’s op­er­a­tions,” it said.

“Sup­port­ing the re­struc­tur­ing and re­cov­ery of Bank of Cyprus is crit­i­cal for the econ­omy as a whole.

As an ac­tive share­holder one of our pri­or­i­ties will be to work to­wards im­prove­ments in cor­po­rate gov­er­nance. This suc­cess­ful cap­i­tal raise is a pos­i­tive sig­nal to the mar­kets, pro­vid­ing in­vestors with ad­di­tional con­fi­dence,” said EBRD’s First Vice Pres­i­dent Phil Ben­nett.

The EBRD’s share­hold­ers de­cided at the an­nual meet­ing in War­saw to start in­vest­ing in Cyprus with one of the pri­or­i­ties be­ing to strengthen the fi­nan­cial sec­tor, mak­ing it more ro­bust to fu­ture shocks and im­prov­ing its gov­er­nance. The ac­qui­si­tion of a stake in Bank of Cyprus is the EBRD’s first in­vest­ment in Cyprus, as part of a 700 mln euro in­vest­ment planned for the econ­omy, in ad­di­tion to set­ting up a lo­cal of­fice o con­sider and mon­i­tor other in­vest­ments.

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