BOCY in non-deal roadshow in NY, London

Bank of Cyprus, the recently recapitalised lender that raised EUR 1 bln and attracted new strategic investors, such as Wilbur L. Ross Jr. and the EBRD, embarked on a series of non-deal roadshows in New York and London this week, in an effort to raise awareness and pave the ground for new bond issues.

The bank intends to issue a covered bond using up to EUR 1 bln of real estate mortgage-back securities as collateral, a senior overseas bond and a corporate repurchase agreement (Repo) to help pay down its short-term debt to the European Central Bank. It also plans to use a EUR 950 mln Cyprus government-guaranteed bond as collateral for the Repos.

Heading the management team is CEO John Hourican and other senior officers, including Christodoulos Patsalides (board member and head of financial management), chief of risk Michalis Athanasiou and Constantinos Pittalis (share relations).

HSBC, hired to consult the management team on all aspects of restructuring, continue to act as advisors during the roadshow as well.

The bank, that was burdened with a EUR 9.5 bln rescue debt carried by now-defunct Laiki Popular Bank, has been repaying this Emergency Liquidity Assistance (ELA) to the ECB and plans to reduce this debt to “less than” 25% of its balance sheet by 2017, a senior official said. At last count, ELA had been reduced to EUR 7.5 bln. The one-time bellwether and darling of the Cyprus Stock Exchange was brought to its knees last year when the Eurogroup of Eurozone finance ministers imposed a bail-in of unsecured deposits above EUR 100,000 in return for equity, as part of the island’s unpopular bailout and austerity measures.

The bank had been exposed to a disproportionate amount of toxic Greek government bonds that were written down by a unanimous decision of EU leaders in November 2011 as a way to prop up the Greek economy. The bank, together with other Cypriot lenders, were also deprived of their Greek branch operations as part of the same deal, increasing the risk exposure in its financial statements.

Despite announcing flat profits of EUR 76 mln until the end of the third quarter, Bank of Cyprus said it was returning to the Cyprus and Athens bourses on or about December 16 with the listing of new shares from the capital raise in September and the cash-for-equity conversion from the bailin of depositors. It will also list some 416 mln new shares at 24c each, the same price as the placement offered to institutional investors, when it raises a further EUR 100 mln to current shareholders from December 15 to January 9, 2015.

However, CEO Hourican, who has been overseeing a radical asset sale and downsizing of the bank during his 12 months in charge, believes a corner has been turned after the historical investment this year.

In a statement last week, Hourican said that “during the quarter we have made further progress in delivering against our strategic objectives,” adding that the Group’s performance “is underpinned by the performance of our core Cypriot operations, supporting our efforts of shrinking to strength through the disposal of non-core operations and assets.” The balance sheet was deleveraged by a further EUR 1.1 bln during the third quarter, he said.