No out-of-court deal for € 600 mln cap­i­tal se­cu­ri­ties

Financial Mirror (Cyprus) - - FRONT PAGE -

An out-of-court set­tle­ment for the nearly 600 mln eu­ros worth of Laiki cap­i­tal se­cu­ri­ties held by about 60,000 bond­hold­ers seems a highly un­likely out­come, even af­ter mem­bers of the the As­so­ci­a­tion of Cap­i­tal Se­cu­ri­ties (ACS) met with Pres­i­dent Ni­cos Anas­tasi­ades on Tues­day.

“The Pres­i­dent’s ef­forts for an out of court set­tle­ment seem trou­ble­some be­cause the Bank of Cyprus stated (last week) that it could not con­sider a class set­tle­ment and that we would have to re­sort to a class ac­tion or in­di­vid­ual law­suits,” ACS Pres­i­dent Phivos Mavrovouni­o­tis said af­ter the meet­ing at the Pres­i­den­tial Palace.

“So, even the com­pro­mise deal to be com­pen­sated for 47.5% in shares or off­set the loans which were guar­an­teed by th­ese se­cu­ri­ties also can­not be achieved,” he said.

Six judges have been ap­pointed – two in Ni­cosia, two in Li­mas­sol, one in Paphos and one in Lar­naca – and they will re­view cases where the bond­hold­ers in­sist that they were duped into buy­ing the bank se­cu­ri­ties.

“We are con­fi­dent that that cases will be won and those who are re­spon­si­ble wil have to pay,” mem­bers of the as­so­ci­a­tion said.

Dur­ing the meet­ing with Pres­i­dent Anas­tasi­ades, the ACS also called for the Fi­nan­cial Com­mis­sioner’s role to be en­hanced.

ACS spokesman leno­tios Had­ji­vasilis clar­i­fied that the as­so­ci­a­tion’s mem­bers are a dif­fer­ent case form the Laiki de­pos­i­tors’ as­so­ci­a­tion (SYKALA), which is why they want their loans to be off­set for the value of their se­cu­ri­ties they lost when Laiki was shut down and handed over to Bank of Cyprus, while the lat­ter un­der­went sev­eral waves of re­cap­i­tal­iza­tion where se­cu­ri­ties were wiped out.

Bank of Cyprus said last week that it could not com­pen­sate hold­ers of cap­i­tal se­cu­ri­ties who saw 600 mln eu­ros worth of their in­vest­ments dis­ap­pear as part of the bank­ing sec­tor’s con­tro­ver­sial bailout in 2013.

A fur­ther 47.5% of un­se­cured de­posits over 100,000 eu­ros were con­verted to eq­uity in the “bail-in” process to re­cap­i­talise the bank, rais­ing just un­der 4 bln at the time, while a fur­ther 1 bln eu­ros was raised in fresh cap­i­tal from for­eign and lo­cal in­vestors in Au­gust last year that helped the bank pass the ECB stress test on cap­i­tal ad­e­quacy.

The As­so­ci­a­tion of Cap­i­tal Se­cu­ri­ties wants a com­pre­hen­sive out-of-court set­tle­ment, ar­gu­ing that se­cu­ri­ties hold­ers were tricked into buy­ing com­plex bank­ing prod­ucts.

CEO John Houri­can, head-hunted from RBS in Novem­ber 2013, has of­ten said he em­pathised with the cap­i­tal se­cu­ri­ties hold­ers, but that af­ter cap­i­tal be­ing raised twice, with the full bless­ing of the Cen­tral Bank of Cyprus, there was noth­ing the bank could do, nor does it have the re­sources.

“Any pro­pos­als re­lat­ing to any col­lec­tive or gen­eral com­pen­sa­tion schemes can­not be ac­cepted or ef­fected by the bank as there is no ad­e­quate legal ba­sis that will sup­port such ac­tions,” the bank said in a re­ply to the as­so­ci­a­tion signed by chair­man Josef Ack­er­mann and se­nior in­de­pen­dent board mem­ber Michael Spanos.

Not­ing the bank is fully aware of the so­cial as­pects of the mat­ter as well as the se­vere eco­nomic con­di­tions that many Cypri­ots, in­clud­ing many cap­i­tal se­cu­ri­ties hold­ers are now fac­ing, the let­ter adds that “the bank to­gether with other par­ties adopts and will con­tinue to adopt var­i­ous ac­tions that help in al­le­vi­at­ing the pain and eco­nomic prob­lems of any so­cially af­fected and vul­ner­a­ble cat­e­gories of the peo­ple.”

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