The Bank of Cyprus says it has sold a portfolio of non-performing loans worth €2.8 billion to Apollo Global Management, a transaction that will reduce its stock of NPLs to €5.2 billion.
The announcement came on Tuesday during the bank’s Annual General Meeting in Nicosia.
Bank of Cyprus CEO John Patrick Hourican, who just got a contract extension through the end of 2020, said in a statement that the sale was “the first meaningful Corporate and SME NPL trade in Cyprus.”
While the actual sale will cost the bank a €135 million loss on the books, the deal will bring down its Non Performing Exposures from 48% down to 38% by transferring the NPE portfolio from the Bank to a Cypriot-registered credit financial acquisition company which will then be bought by hedge funds affiliated with Apollo.
The portfolio comprises 14,024 loans to corporate borrowers as well as small and medium enterprises, secured over 9,065 properties
The bank also said it intends to invest €450 million in senior debt, subject to regulatory approval.
The deal involves bad loans which have real estate as collateral, while a statement by the largest lending institution in Cyprus said the Bank would receive €1.4 billion out of the transaction.
Specifically, the portfolio comprises 14,024 loans to corporate borrowers as well as small and medium enterprises (SME), secured over 9,065 properties according to BoC.
The sale was carried out through called Helix, with NPL being exchanged at 48% of book value at €1.4 billion while having a positive impact on its capital, according to CNA News Agency.
CNA also said that following a transitional period, where servicing will be coordinated by the Bank, the intention is that the servicing of the portfolio will be carried out by a long-term servicer.
The deal is pending all regulatory approvals but there were no reports of hiccups expected in the process.
Non Performing Loans in Cyprus were at €19.9 billion in April, with a downward trend since 2013 when they were worth a whopping €27 billion. But there were along the way that slowed down the pace as more NPL were appearing through the system.
According to Kathimerini Cyprus, the non-performing loans in Cyprus are now estimated at €17.2 billion while the Bank of Cyprus’ NPEs come down to €5.2 billion.