Government throws Co-Op ball in Hellenic’s court

The Cyprus Cooperative Bank (CCB) will examine Monday a final offer from Hellenic Bank to acquire the troubled state-owned institution, with government seeing the buyout as a good step while critics saying tax payers are unfairly picking up the tab.

Following a President’s Cabinet meeting on Friday, which gave the nod for the deal to go forward, Finance Minister Harris Georgiades said the ball was in Hellenic’s court, with the bank now expected to formulate a capitalisation plan.

CCB executives are calling an emergency general meeting on Monday to discuss the offer.

The state, which owns about 99% of the CCB, received two bids for the co-op, which has a huge burden of non-performing exposures (NPEs) amounting to €6.2 billion, roughly 60% of its total loans.

Hellenic, a Cypriot commercial bank, has shown interest only in the “good” part of the CCB, banking operations and healthy assets.

But the bidder has not been forthcoming with the composition of its shareholders during the negotiations, which became intensive ironing out of final details to make the package more attractive to the buyer.

The government and CCB are now waiting for more details on Hellenic's capitalisation plan, essentially who will put money in teh deal to make the takeover financially solid. 

Georgiades said that under the deal, Hellenic Bank would manage deposits to the tune of €9.7 billion while it would absorb €10.3 billion in assets including loans, bonds and cash.

But toxic assets and bad loans will not be absorbed by Hellenic under the deal, with the state taking over €8.3 billion, of which bank-owned real estate is valued up to €600 million and close to €7 billion are bad loans.

Georgiades said any revenue from those assets will go into state coffers, adding that the deal effectively accomplishes a mail goal that separates the management of a healthy bank from its bad loans that put a heavy burden on the institution.

The comments came following criticism that tax payers would be paying essentially for a healthy bank to be handed over into private hands while being stuck with losses from the bad part of a failed bank.

The state also offered asset protection scheme, reportedly around €500 million to cover for potential losses on high-risk loans. Hellenic was asking for a much higher amount, according to media sources, but it was negotiated down.

The state will also make a €1 billion payment next week in the form of issuing bonds, following a government €2.5 billion deposit into CCB back in April. This was done in an effort to dispel uncertainty among depositors who were getting jittery and could destroy any deal had they chosen to withdraw their savings in droves.

The government says it is also taking steps to ensure that CCB employees will be treated fairly, with President Anastasiades having met with union representatives on Friday to reassure them of their rights.

PEO union leader Pambis Kyritsis said they were satisfied with what they heard from the president but clarified that employee rights will have to be clearly stated as part of the agreement.

“We hope that we complete the agreement, otherwise things won’t go smoothly,” Kyritsis said.