Cyprus Capital Partners to launch € 100 mln SME fund
Cyprus Capital Partners, the Nicosiabased private equity fund manager, is in the process of raising EUR 100 mln to invest in small and medium-sized enterprises with activities and profitability abroad.
The company’s CyCap Opportunity Fund is a private equity investment fund “targeting venture, growth and expansion opportunities arising from the exceptional circumstances now emerging in Cyprus.”
However, the firm’s Director, Thomas Kingston, said that the fund is not interested in the high-risk distressed mortgage market, currently burdened with more than 50% of the island’s private debt in the form of nonperforming loans. Kingston estimates that loan managers will not be interested to buy loan packages to turn the NPLs into longterm revenue streams, but will focus on acquiring assets through loans market with which they are connected.
In comments to the Cyprus News Agency, he said that investment funds will not be interested in household loan portfolios, primarily for ethical reasons.
“One is ethics, fund managers cannot even think about a family losing their home, you don’t want to be in that business, a few fund managers want to be in that business. That’s probably a problem the banks have to solve,” he said.
Under certain conditions, he said, investment funds could enter the household loan market, depending on the discount of the bank (from the nominal value) and the size of the bank, and if there is enough room in the loan to give the borrower enough freedom to begin paying back.
Kingston noted that there should be a distinction between the purchase and sale of houses and the funds entering a market and manage business loans and large loans for the property sector.
“It is important to separate these two. Fund managers are rarely interested in the mortgage loans, loans that have to do with people’s homes”, he said, adding that funds are interested in commercial loans, in real estate to a certain degree but also in companies that can produce things and contribute to the real economy.
He also expressed the view that fund managers will come to Cyprus looking for potentially lucrative assets that happen to be attached to NPLs and will use the NPLs as a way of acquiring that asset, as opposed to buying a basket of loans and turn it into a revenue stream.
As he said, the idea is to take these NPLs and turn them into assets that generate revenue year on year. He also said that there is interest in buying the loans in order to convert that debt into equity. As an equity holder, he said, the fund will help that company turn around and become more valuable.
Speaking on the large amount of nonperforming loans in the Cypriot banks, he expressed the view that setting up a bad bank is the best way to address the problem.
“The banks themselves have the opportunity to turn NPLs into performing loans and one way to do that is a bad bank, where a bank will establish a finance company they will hire specialists who know how to take a long-term view on these loans and slowly rehabilitate the loans into performing loans”, he said, adding that what the banks suffer from is time and capital.
According to the company’s website, the CyCap Opportunity Fund has been granted the distinguished European EuVECA designation, and is registered both in Cyprus with the Cyprus Securities and Exchange Commission and across the EU with the European Securities and Markets Authority.
The fund’s 10-year life-cycle allows CyCap to cultivate a long-term investment approach. “While targeting opportunities in Cyprus, our efforts seek to facilitate growth and expansion both locally and internationally, allowing our portfolio companies to leverage the unique regional position of Cyprus; at the epicentre of adjacent markets in the EU, the Middle East, Eastern Europe and Africa.”