Sen­vest to hold BOCY, HB for “up to 3 years”

Financial Mirror (Cyprus) - - FRONT PAGE -

Cana­dian-owned Sen­vest Cap­i­tal, whose two sub­sidiary funds have dou­bled their stake in Hel­lenic Bank to 5% fol­low­ing the re­cent rights is­sue and ex­er­cise, plans to hold on to its Cyprus in­vest­ments, in­clud­ing shares worth nearly 60 mln euros in Bank of Cyprus, for up to three years.

This is an ad­di­tional vote of con­fi­dence in the is­land’s bank­ing sys­tem that has shrunk con­sid­er­ably and is strug­gling to re­cover bur­dened with an enor­mous port­fo­lio of non-per­form­ing loans and nar­row mar­gins of growth amid an econ­omy that, too, is strug­gling to come out of re­ces­sion.

Hel­lenic raised 201 mln euros from a rights is­sue of­fered to ex­ist­ing share­hold­ers, more than the 105 mln cap­i­tal short­fall iden­ti­fied by the re­cent Euro­pean Cen­tral Bank’s stress tests on Eu­ro­zone banks in Oc­to­ber.

Re­tail and in­sti­tu­tional share­hold­ers sub­scribed to the of­fer and ex­er­cised their rights at 3.75c each, with the bank say­ing that it can raise a fur­ther 20 mln euros un­til the end of Jan­uary if nec­es­sary, cor­re­spond­ing to the avail­able rights that were not ex­er­cised.

The Church of Cyprus, the one-time pri­mary share­holder of the bank, said re­cently that it would not ex­er­cise the rights and would sell its free rights to third par­ties to raise funds for its own op­er­a­tions. Its stake has di­min­ished from the 25% con­trol it once en­joyed to 8% prior to the rights is­sue and is now at 3.6% after sell­ing alll its rights.

The three ma­jor share­hold­ers that res­cued the bank by rais­ing 100 mln euros at the be­gin­ning of the year, on­line gaming gi­ant Wargam­, New York-based hedge fund Third Point Hel­lenic Re­cov­ery Fund and lo­cal in­vest­ment house Deme­tra In­vest­ments Ltd, fully sup­ported the rights is­sue, “re­con­firm­ing both their con­fi­dence in and their com­mit­ment to the group,” a bank state­ment said.

Third Point is now the big­gest share­holder with a 26.98% stake, fol­lowed by Wargam­ing at 26.46%, Deme­tra at 10.69% and New York-based Sen­vest In­ter­na­tional LLC and Sen­vest Master Fund LP at a com­bined 5.03%.

Sen­vest Master Fund is a Cay­man

Is­lands-regis­tered in­vest­ment fund, while Sen­vest Cap­i­tal, head­quar­tered in Mon­treal, is listed on the Toronto Stcok Ex­change and op­er­ates as a hold­ing company with CAD 2 bln in as­sets and eq­ui­ties and in­ter­ests in mer­chant bank­ing, as­set man­age­ment, real es­tate and elec­tronic se­cu­rity

The group is about 70%-owned by the Mashaal fam­ily and headed by Richard R. Mashaal as the Pres­i­dent at Sen­vest In­ter­na­tional LLC and Vice Pres­i­dent at Sen­vest Cap­i­tal Inc., while Vic­tor Mashaal is chair­man and pres­i­dent of Sen­vest Cap­i­tal Inc.

It is also an 80% majority owner of ARU Cyprus Euqi­ties and In­vest­ments Limited.

Fol­low­ing the 2013 melt­down and bailout, “th­ese stress­ful con­di­tions of­fer the types of op­por­tu­ni­ties that we seek in our con­trar­ian in­vest­ment ap­proach, as many in­vestors ex­trap­o­late the cur­rent dire cir­cum­stances as if they will per­sist for­ever,” Sen­vest said in its lat­est an­nual re­port.

“We re­turned to Cyprus in early Oc­to­ber [2013], reen­gaged with man­age­ment teams and were able to as­sess in­ter­est­ing in­vest­ment op­por­tu­ni­ties, some of which have started to bear fruit.”

The group’s largest in­vest­ment in the third quar­ter of 2014 was the sin­gle-stock fund – Sen­vest Cyprus Re­cov­ery In­vest­ment Part­ners, LP (SCRIF) – a ve­hi­cle that owns a $88 mln (EUR 58.3 mln) in­vest­ment in the Bank of Cyprus, fol­low­ing the re­cap­i­tal­i­sa­tion led by turn­around in­vestor Wil­bur Ross, who was also the lead in­vestor in the Talmer 2010 pri­vate place­ment that Sen­vest par­tic­i­pated in.

“BOC is now one of the bet­ter cap­i­talised banks in Europe, with a TCE1 ra­tio of more than 15%, and it is the dom­i­nant mar­ket player in Cyprus. The suc­cess of this in­vest­ment is also tightly linked to the Cypriot econ­omy and while cur­rently in re­ces­sion, trends are point­ing to a re­turn to growth next year,” Sen­vest said.

“The coun­try has mas­sive off­shore hy­dro­car­bon re­sources that it is in the early stages of de­vel­op­ing. The econ­omy may ben­e­fit not only from the in­vest­ments that lead the de­vel­op­ment of the re­sources, but the na­tion’s po­ten­tial share of rev­enues over time could cover its na­tional debt. We look to hold on to this in­vest­ment over roughly a three year pe­riod. By way of com­par­i­son, Greek banks trade at 0.9x – 1.5x tan­gi­ble book value. De­spite large eq­uity raises ear­lier this year, Greek bank stocks traded down in the quar­ter due to fears they will re­quire even more cap­i­tal as a re­sult of the Euro­pean bank stress tests.”

With 5,364,374,709 new shares in­tro­duced after the re­cent cap­i­tal raise, Hel­lenic’s ex­ist­ing cap­i­tal has almost dou­bled to 9,300,973,920 shares, with trad­ing on the new ad­di­tional shares set to start on the last day of the year.

But with nearly 74% of the stock in the hands of the five big­gest in­vestors, in­clud­ing the Church, the free-float is ex­pected to re­main at present lev­els with grow­ing de­mand from re­tail in­vestors.

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