Only two bids submitted for ‘good’ Co-op bank, uncertainty in the air
Monday saw the last day for interested bidders to put in a firm offer for acquiring the Cyprus Cooperative Bank’s “good portfolio” with only two binding proposals finding their way to the table. Following the submission of the offers, the procedure will now go ahead with the detailed review of the two binding proposals, and in particular whether they are compatible with the terms and conditions of the tender.
The two investors that have submitted binding proposals for the CCB, are the Hellenic Bank and US investment fund Apollo Global Management, itself an investor in CCB’s property management and recovery subsidiary.
According to news reports, the two binding proposals are being evaluated by the supervisory institutions.
As reported by Phileleftheros, Citigroup Global Markets, the CCB’s appointed financial advisor, is presenting the proposals to the European Central Bank’s Single Supervisory Mechanism, while Citigroup has also sent questionnaires to the potential investors seeking certain clarifications.
Once the proposals’ presentations are concluded, there will be a clear picture as when the final transaction is to go ahead. According to sources close to the CCB, the evaluation procedure is to last until the end of May. In the event that neither proposal is considered fit, then the whole procedure is expected to be repeated.
Hellenic Bank and the US-based Investment Fund Apollo are keeping a tight lid on the content of their proposals.
The proposal chosen will have to get the green light the Single Supervisory Mechanism of the ECB. In any case the European Commission is keeping a tight leash on the whole procedure, demanding that the sale procedure of the Cooperative Bank does not fall off track. The procedure is thus expected to be completed by the end of June.
Meanwhile, Hellenic Bank is paying a price for not disclosing the content of its CCB bid. On Wednesday, the Cyprus Stock Exchange announced that the Securities and Exchange Commission (CySEC) decided to suspend the trading of Hellenic Bank titles as of May 16.
The suspension is to remain in force until the bank discloses the content of their proposal for the acquisition of the CCB in a manner that meets the requirements of Regulation 596/2014 regarding the Market Abuse regulation. The regulation in question has to do with regulating transparency and fair information for investors.
On Monday, Hellenic Bank announced that it had submitted a bid for the Cyprus Co-operative Bank without giving any further information or making any reference to the potential capital needs that may arise.
According to information leaked to the press, the supervisory authorities insist on the need that potential buyers should have funds of up to EUR 500 million in order to be eligible to acquire the Co-op’s good portfolio involving loans worth about EUR 4.5 billion. The question is which investor is willing to invest that amount of money and how will it be evaluated by the Single Supervisory Mechanism. it has been made known that HB had trouble convincing its shareholders to increase the bank’s capital.
The Hellenic Bank board reportedly decided at its last marathon meeting on how to formulate the proposal so that existing shareholders can cover a large part of their new capital needs for a lower dilution of their current holdings.
According to press information, while the bank’s existing shareholders have expressed concerns regarding dilution they may suffer from a possible broadening of the shareholders’ structure, Atlas Merchant Capital Investment Fund is planning to put in a bid to participate in the new shareholding structure of the HB, in cooperation with J.C. Flowers and Pimco.
Hellenic Bank’s current shareholder structure includes Third Point with 26.2%, Wargaming 24.9%, Demetra Investment 10.1%, EBRD 5.4%, other domestic investors 15.9% and other foreign investors 17.5%.
While HB is faced with the above challenges, the Apollo investment fund’s proposal may encounter difficulties during the evaluation process as it does not have a banking license. Sources cited on Tuesday by the Cyprus News Agency reported that the fund contacted Alpha Bank in Greece for
possible participation in the process, but there was no end.
In another development this week, the European Commission approved, in accordance with the EU Merger Regulation, the acquisition of Altamira Cyprus by the CCB and investment fund Apollo Capital Management, L.P.
Altamira Cyprus is active in the management and recovery of non-performing loans and was set up by the bank in cooperation with Altamira Spain last year. In addition to managing EUR 7.2 bln in non-performing loans, Altamira Cyprus was also responsible for the management of real property in the possession of the CCB, worth EUR 0.4 bln. It intended to expand its operations to provide its services to other banks and financial institutions in Cyprus. Worth noting is the fact that the US-based investment fund Apollo is an existing shareholder of Altamira Spain along with Santander Bank, Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board.
According to the Commission’s announcement, the body has come to the conclusion that the proposed transaction does not raise competition concerns as it will increase the number of non-performing loan service providers in Cyprus, thus improving the competitive environment.