Cen­tral Bank gives green light to Wil­bur Ross

Financial Mirror (Cyprus) - - FRONT PAGE -

The Bank of Cyprus board de­cided on Tues­day to call for a share­hold­ers’ meet­ing within 60 days, when US-based in­vestor Wil­bur Ross is ex­pected to be elected to the board, rep­re­sent­ing funds that now con­trol about 19% of the bank.

The bank said that a gen­eral meet­ing of its share­hold­ers will take place on Novem­ber 20, but did not add any fur­ther de­tails, such as when the present board would step down.

Cen­tral Bank of Cyprus Gov­er­nor Chrys­tall Yiorkadji sent a stern let­ter to the board on Mon­day di­rect­ing them to re­sign and seek re-elec­tion, if they wish, at a share­hold­ers’ meet­ing after the lat­est company re­struc­tur­ing.

The board had ini­tially asked the cen­tral­banker to vet bil­lion­aire Ross, who, to­gether with other in­vestors is pump­ing 400 mln euros into the is­land’s big­gest lender as part of the 1 bln re­cap­i­tal­i­sa­tion ap­proved last month.

Yiorkadji re­port­edly replied that in­stead of adding Ross as the 14th mem­ber to the cur­rent 13-strong board, that they should all re­sign and seek re-elec­tion at an up­com­ing share­hold­ers’ meet­ing.

It is un­clear if the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment (EBRD) will also seek a board rep­re­sen­ta­tion, to en­sure that its in­vest­ment of 120 mln euros is in check.

The cen­tral­banker also warned the board to re­frain from tak­ing any ex­ec­u­tive decision that would im­pair the bank’s ac­tiv­i­ties or bur­den a fu­ture man­age­ment with un­nec­es­sary re­spon­si­bil­i­ties.

In any case, the cur­rent board still has to ap­prove the fi­nal part of its re­cap­i­tal­i­sa­tion plan, to in­clude 100 mln euros worth of shares of­fered to re­tail and old in­vestors at 24c each, as was the case with in­sti­tu­tional in­vestors, with the to­tal re­cap­i­tal­i­sa­tion adding up to 1.1 bln. Once this is com­pleted, the bank’s ad­justed share reg­is­ter will de­ter­mine the new own­er­ship and the stock will be ready to re­sume trad­ing on the Cyprus Stock Ex­change.

Share­hold­ers con­trol­ling more than the 5% thresh­old in­clude the ‘Legacy Laiki’ of the dis­solved Laiki Popular Bank at 9.6%, two funds in­tro­duced by Ross – Ren­ova Group with 5.46% and TD As­set Man­age­ment with 5.23% – and the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment, with a hold­ing of 5,021%.

It is also ex­pected that the Novem­ber meet­ing will elect a new board, but it is not clear which of the present direc­tors will seek re-elec­tion.

The re­cap­i­tal­i­sa­tion came about from the is­sue, ini­tially by pri­vate place­ment to strate­gic in­vestors, of 4.17 bln new shares at 24c each, the same price of­fered to all three cat­e­gories of new, ex­ist­ing and old share­hold­ers. As a re­sult, the bank’s is­sued share cap­i­tal now com­prises 8.9 bln or­di­nary shares with a nom­i­nal value of 10c each.

In state­ments after the last share­hold­ers’ meet­ing at the end of Au­gust, when the bank an­nounced a to­tal of EUR 81 mln in post-tax prof­its for the first half (Q1: 31 mln), CEO John Houri­can had said that ap­proval of the cap­i­tal in­crease would boost the bank’s liq­uid­ity ra­tios far beyond the re­quire­ments of the Euro­pean Bank­ing Au­thor­ity’s stresstest sce­nar­ios.

The Group’s cap­i­tal po­si­tion was strength­ened with Core Eq­uity Tier 1 ra­tio in­creased from 10.5% in end-De­cem­ber to 11.3% as at June 30.

Com­bined with last month’s decision on the EUR 1 bln cap­i­tal in­crease, the bank’s Core Eq­uity Tier 1 ra­tio is now ex­pected to hover at 15.6% (tran­si­tional ba­sis) and 15.1% (fully-loaded ba­sis) mak­ing it “one of the best cap­i­talised banks in Europe,” the CEO had de­clared.

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