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