Gov’t to re­pay 750m of ex-Laiki bond held by Bank of Cyprus

Financial Mirror (Cyprus) - - FRONT PAGE -

The Min­istry of Fi­nance has no­ti­fied the Bank of Cyprus that the gov­ern­ment will re­pay EUR 750 mln to­wards a EUR 1.9 bln bond held by the bank is­sued for the re­cap­i­tal­i­sa­tion of Laiki Popular Bank that was trans­ferred to Bank of Cyprus in March 2013, fol­low­ing the ac­qui­si­tion of cer­tain as­sets and li­a­bil­i­ties of Laiki.

The bond is pledged as col­lat­eral with the Euro­pean Cen­tral Bank (ECB).

Part of the amount re­paid will be used to re­duce ECB and ELA fund­ing, as has been re­cent prac­tice by the cur­rent ad­min­is­tra­tion.

In its first-quar­ter re­sults re­port, Bank of Cyprus said it had re­duced the emer­gency liq­uid­ity as­sis­tance (ELA) from a peak of EUR 11.4 bln in April 2013 to 6.9 bln, while post-re­sults, it said it fur­ther low­ered the fa­cil­ity to EUR 6.4 bln by the end of May.

“With the bond trans­ferred to the bank at fair value at the ac­qui­si­tion date, there will be an ac­count­ing profit of about EUR 33 mln re­sult­ing from this trans­ac­tion,” Bank of Cyprus said in an an­nounce­ment, adding that, “the net in­ter­est in­come of the bank go­ing for­ward will be neg­a­tively af­fected by the early re­pay­ment of the bond, pri­mar­ily driven by the up­front recog­ni­tion of the ac­count­ing gain.”

The bank said that the re­main­ing amount of the bond of EUR 340 mln will be re­placed on its ma­tu­rity on July 1 by a new bond for the same nom­i­nal amount, with pric­ing based on the Cyprus gov­ern­ment yields pre­vail­ing at the time.

The gov­ern­ment’s re­pay­ment fol­lows the re­cent of­fer­ing of a EUR 1 bln bond at a coupon of 3.875% and yield of 4% ma­tur­ing in 2022.

Last year, the gov­ern­ment had ini­tially re­paid EUR 950 mln of the ex-Laiki bond on July 1, 2014.

As at the end of the first quar­ter, the Bank of Cyprus Group’s to­tal as­sets amounted to EUR 26.7 bln and to­tal eq­uity was EUR 3.5 bln. It’s first quar­ter re­sults saw af­ter-tax prof­its of EUR 29 mln, a turn­around from a loss of EUR 337 mln in the last quar­ter of 2014, but non-per­form­ing loans (in ar­rears form more than 90 days) to­taled EUR 12.79 bln and ac­counted for 53% of gross loans.

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