BOCY in non-deal road­show in NY, London

Financial Mirror (Cyprus) - - FRONT PAGE -

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.

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