Cyprus Cap­i­tal Part­ners to launch € 100 mln SME fund

Financial Mirror (Cyprus) - - FRONT PAGE -

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.”

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