Hellenic Bank, the second largest lender in Cyprus, announced that it has entered into an agreement with Oxalis, an entity managed and advised by Pacific Investment Management Company LLC (PIMCO), for the securitization of a portfolio of non-performing assets (NPEs) of EUR 1.32 billion and the sale of a service APS Debt Servicer bank platforms.
The bank announced that the deal, combined with the acquisition of a performing loan portfolio from RCB Bank, would lower its NPE ratio to 3.4%.
In a statement, Oliver Gatzke, the bank’s CEO, said “this is a transformative deal that marks a defining step in the Bank’s NPE work,” adding that the deal substantially reduces the Bank’s NPE balance sheet exposure, lowering the NPE ratio to a pro forma 3.4%.
“With this agreement and the disposal of our NPE portfolio, we are now able to focus on our strategic goals to grow and transform the bank for the benefit of our customers, our employees and our shareholders,” he added.
According to the bank, once the deal is completed, risk will be significantly reduced on the bank’s balance sheet by reducing NPE by €0.72bn, bringing the remaining NPE portfolio to around €0.653bn, of which €0.433bn is covered by the asset protection program. Scheme (APS), while the bank’s pro forma NPE ratio for the Transaction will decrease from 21.0% as of December 21 to c. 11.6% and up to gr. 4.4% excluding NPP-NPP; taking into account the acquisition of a working loan portfolio from RCB Bank Limited, the pro forma NPE indicator (excluding APS-NPE) is reduced to c. 3.4%3.Preliminary risk reduction on the balance sheet will allow the Bank to normalize its cost of risk going forward, as well as benefit from the interest income associated with holding 66.7% of the senior bonds, the bank added.
Hellenic also noted that the Deal has an overall positive equity impact on a CET 1 ratio of c. 15 basis points based on December 20 financials after completion, taking into account portfolio deconsolidation and gains related to the sale of APS Debt Servicer.
“The deal values the Starlight portfolio at an implied price of €320m, which translates into a P/GBV ratio of 41%, which compares well with other similar deals,” the bank said, adding that the deal also values 100% of the value enterprises. APS Debt Serviceer, as well as a €37m 10-year management and maintenance contract with NPE Bank, including €5m profit related to the achievement of certain objectives, while Oxalis acquires a 95% stake. Mezzanine and Junior Notes for a fee of 86 million euros.
Hellenic also announced that through the deal, the Bank is entering into an exclusive long-term service agreement (SLA) to manage its remaining NPE portfolio, as well as any future NPE formation, with an initial SLA of 10 years.
“The bank expects the partnership with PIMCO to be beneficial in meeting its deleveraging goals, given the latter’s years of experience and track record in the European dormant sector,” Hellenick said. The transaction is expected to close by the end of 2022 and is subject to regulatory and antitrust approval and approval. The deal is at arm’s length and is the result of a two-stage competitive process with significant investor interest. It is noted that Poppy SARL, which owns 17.3% of the authorized capital of the bank, belongs to investment funds managed by PIMCO, the bank added.