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24 June, 2024
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What are they afraid of?

Credit buyout companies should be more transparent with their bottom lines

Panayiotis Rougalas

Panayiotis Rougalas

Transparency is not merely a good thing; it is essential. However, with the exception of one, credit buyout companies seem unwilling to disclose their financial results, keeping them shrouded in secrecy.

As of 2018, credit buyout companies were burdened with significant private debt. According to data from the Central Bank, by the end of 2022, these companies had loans amounting to a book value of €8.1 billion on their balance sheets, with 77.7% classified as non-performing loans (NPLs). Despite the concerns raised by inflation and higher lending rates affecting the serviceable portion of the companies' loan portfolio, the Central Bank notes that the elevated level of NPLs indicates a low risk of asset quality deterioration and its subsequent implications for financial stability.

It's important to note, however, that the figures mentioned above have been presented differently by the Central Bank, which altered its calculation method for 2022. In its 2021 report, the Central Bank stated that as of the end of that year, Credit Acquisition Companies were managing 80,192 loans with a maximum total contractual balance of €19.2 billion. The report also highlighted the high concentration within the sector, with the three largest companies holding 80% of total loans by value as of December 31, 2021.

The process of divestment has faced numerous hurdles, leading to constraints on these companies' ability to comply with divestment laws. Perhaps, their reluctance to disclose results stems from concerns that they may not appear successful in achieving their internal objectives when entering the business in Cyprus. However, with the tools provided by enacted legislation before the end of 2023, such as the ability to facilitate timely restructurings or recoveries on collateral, these companies must now embrace transparency obligations. Given the substantial private debt they hold within the Cypriot economy, akin to banks, they should provide a clear picture of their assets. If they do not initiate this process voluntarily, the state may need to compel them to disclose results in the near future.

Regarding KEDIPES, the annual cash inflows for 2023 matched those of 2022, standing at €440.8 million. According to KEDIPES reports, the 2023 annual cash inflows from loan and property management totaled €434.7 million, equivalent to 6.5% of the nominal value of the loan and property portfolio of €6,706 million as of December 31, 2022. Receipts from loan and property management reached €2,025 million, representing 25.1% of the nominal value of the loan and property portfolio, which stood at €8,051 million as of September 1, 2018.

[This article was translated from its Greek original and may have been edited for clarity and brevity]

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