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03 October, 2023
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Eurobank acquires 17.3% stake in Hellenic Bank for €167.9 million

Pimco's evolution: From investor to non-performing loan giant

Panayiotis Rougalas

The Eurobank has agreed to acquire an additional stake of around 17.3% (equivalent to 71,428,572 shares) in the Hellenic Bank at a total price of 167.9 million euros, or 2.35 euros per share. This percentage previously belonged to Pimco, also known as Poppy S.à r.l., the investment fund that entered during the time when the Hellenic Bank acquired a significant portion of the Cooperation.

Following Eurobank's move to acquire 17.3% of the Hellenic Bank by paying 167.9 million euros to Pimco, at the moment, the valuation appears to be slightly below 1 billion euros from Eurobank's perspective. When Eurobank first bought shares of the Hellenic Bank in the summer of 2021 from Third Point (which held 12.6% of the investment fund back then), it had purchased those shares at one-third of the price it paid for the current ones from Pimco. Clearly, Eurobank sees an investment opportunity in the Hellenic Bank with prospects. However, questions arise about why Eurobank rushed to buy Hellenic Bank shares during a period when bank shares are high due to high interest rates. If it had waited until the following year, the bank shares might have fluctuated at lower prices due to reduced inflation.

Major shareholders other than Eurobank will now be Demetra Holding Plc with 21.3% and Wargaming Group Ltd with 6.8%.

The truth is, Eurobank has already benefited from its participation in the Hellenic Bank, starting from its 29.2% ownership until recently. Eurobank's adjusted pre-tax profits for the first half of 2023 from its 29.2% ownership amounted to 712 million euros, and adjusted net profits reached 599 million euros. According to the financial results announced by Eurobank on July 31, 2023, the total net profits stood at 684 million euros, primarily including a 111 million euros gain from acquiring the Hellenic Bank stake. Around 44% of the adjusted net profits came from activities in Cyprus (adjusted profits of 90 million euros), and 49% from Bulgaria (adjusted profits of 101 million euros), as reported by Eurobank.

It's possible that Eurobank envisions further profits from the Hellenic Bank due to interest rates and the liquidity deposited in the European Central Bank, generating millions of euros like a "goose laying golden eggs."

After the completion of the acquisition, Eurobank's stake will reach 46.5%. With the completion of this action, Eurobank will be obligated to make a "public offer" for all Hellenic Bank shares not owned by it at that time. After making an offer for 2.35 euros per share to Pimco, for subsequent increases in ownership, Eurobank has "locked in" the price of 2.35 euros per share and will need to offer at least this amount to other shareholders, according to banking sources.

In any case, Eurobank is moving forward with the plan it set out in July 2021, which is to acquire the Hellenic Bank in its entirety. Since then, it has bought shares from Third Point, Wargaming, Senvest, and now Pimco. Initially, it purchased 12.6% of Hellenic Bank shares, then 13.4% of shares owned by Wargaming, and subsequently 3.2% of shares held by Senvest in the Hellenic Bank.

Major shareholders other than Eurobank will now be Demetra Holding Plc with 21.3% and Wargaming Group Ltd with 6.8%. The "remaining" shareholders of the bank hold 23.5%.

From now on, the movements within the Hellenic Bank and also within Eurobank Cyprus will be of interest, as the actions of the parent company will reshape the banking landscape of Cyprus in the coming months.

When the Hellenic Bank joined the Cooperation, it was planning to proceed with a capital increase of 150 million euros, at a subscription price of 70 cents per share in cash. Out of this, 100 million euros would be through issuing preferred rights to existing shareholders, and 50 million euros through private placement to BRAVO Strategies III (BSIII), which later became Poppy Sarl, formerly known as Pimco.

Pimco, originally an investor, transformed into a significant buyer of non-performing loans (NPLs) on the island, swiftly creating the company "Themis Portfolio Management Ltd." It acquired two major NPL portfolios, "Helix 2" and "Helix 3," from the Cyprus Bank, and recently the NPLs of the Hellenic Bank, the "Starlight" portfolio. Alongside "Starlight," it also acquired APS Cyprus, the loan servicing company of the Hellenic Bank.

It's evident that the Fund, upon entering the island, while initially aimed for another business, eventually pivoted in a different direction.

[This article was translated from its Greek original]

Cyprus  |  eurobank  |  hellenicbank  |  banks  |  money  |  economy

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