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Financial Mirror (Cyprus) - - FRONT PAGE -

Hel­lenic Bank, one of the four Cyprus sys­temic banks that were sub­jected to cap­i­tal stress tests by Euro­pean bank­ing au­thor­i­ties, an­nounced a rights is­sue of 220mln euros that will help it “more than cover” a 105 mln short­fall seen in the ex­er­cise.

Un­der the three-sce­nario tests con­ducted by the Euro­pean Cen­tral Bank and the Euro­pean Bank­ing Au­thor­ity, Hel­lenic Bank passed two of the bench­marks and failed in the third ‘ad­verse’ sce­nario with its Common Eq­uity Tier 1 ra­tio (CET1) at 1.7%, far be­low the min­i­mum re­quired 5%. The “worst case” sce­nario re­sulted in a cap­i­tal re­quire­ment of EUR 277 mln.

On Fri­day, the bank said it plans to in­crease its share cap­i­tal by a EUR 220 mln is­sue of­fered only to ex­ist­ing hold­ers at a rate of one right per share. The rights will be listed on the Cyprus Stock Ex­change after the ap­proval of the rel­e­vant au­thor­i­ties

Ev­ery two rights ex­er­cised at 3.75c will pro­vide a right to buy three fully paid newly is­sued or­di­nary shares of 1c nom­i­nal value. The ex­er­cise price rep­re­sents a dis­count of 27.5% to the the­o­ret­i­cal ex-rights price based on the share’s clos­ing price on the CSE on Oc­to­ber 31.

Rights hold­ers may also ex­er­cise a pre­sub­scrip­tion right to sub­scribe for ad­di­tional shares in the bank, to the ex­tent that such shares are not sub­scribed by other hold­ers of sub­scrip­tion rights.

The bank’s two ma­jor share­hold­ers, Third Point Hel­lenic Re­cov­ery Fund, L.P. and Wargam­ing Pub­lic Company Ltd, each with a 20.3% stake, are sup­port­ive of the is­sue and have each un­der­taken to sub­scribe in full for the shares cor­re­spond­ing to their rights. Third Point and Wargam­ing, to­gether with lo­cal in­vest­ment fund Deme­tra, in­jected EUR 100 mln into the bank ear­lier this year.

Deutsche Bank AG

London

is

act­ing

as

sole

global co­or­di­na­tor and joint place­ment agent, Axia Ven­tures Group is act­ing as joint place­ment agent, N.M Roth­schild & Sons is act­ing as fi­nan­cial ad­vi­sor. Hel­lenic Bank (In­vest­ments) Ltd is act­ing as the un­der­writer re­spon­si­ble for draw­ing up the prospec­tus and pre­par­ing all nec­es­sary sub­mis­sions to the CySEC.

“Hel­lenic Bank aims to proac­tively strengthen its cap­i­tal base and raise suf­fi­cient cap­i­tal to en­able the bank to pur­sue business op­por­tu­ni­ties in the re­cov­er­ing Cypriot en­vi­ron­ment and utilise its com­pet­i­tive ad­van­tages to grow cus­tomer num­bers and loan book and gain mar­ket share,” it said in an an­nounce­ment.

Fol­low­ing the rights of­fer­ing, the bank’s core eq­uity CET-1 ra­tio will in­crease to 13.2% based on cur­rent cap­i­tal reg­u­la­tion and 12.4% based on CRR ex­clud­ing tran­si­tional ar­range­ments, thus ex­ceed­ing by far the ECB and EBA stress test re­quire­ments.

This year, the bank also pro­ceeded with a rights is­sue, bond con­ver­sions of EUR 24 mln and other ac­tions worth a to­tal EUR 71 mln that in­cludes sell­ing the bank­ing op­er­a­tions in Rus­sia (but main­tain­ing a Moscow rep of­fice) for a gain of EUR 2 mln.

Chair­man Irena Ge­or­giadou said in her notes to the 9month re­sults, ap­proved by the board last week, that de­posits as at Septem­ber 30 were up 11% year-on-year to EUR 6.13 bln, from EUR 5.51 bln in the same nine-month pe­riod last year. And this at a time when the Cen­tral Bank of Cyprus an­nounced that Septem­ber saw the high­est de­posits out­flow from the bank­ing sys­tem since July 2013, as to­tal de­posits fell by EUR 850.6 mln. Ge­or­giadou said that pre-tax earn­ings from op­er­a­tions were up 39% at EUR 119 mln, which al­lowed for higher pro­vi­sions of EUR 259 mln, which, how­ever, re­sulted in pre-tax losses ris­ing 73% to -140 mln or -124.1 mln at­trib­ut­able to share­hold­ers. Thus, losses per share were im­proved from - 12.1c in 9M2013 to -3.8c in 9M2014.

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