The ink had hardly dried on a deal that will see Bank of Cyprus get a €1 bln capital increase, mainly from foreign investors, and the bank’s CEO announced that the island’s biggest lender will issue €1 bln in bonds some time in September.
This follows the Cyprus sovereign’s recent return to the markets with a €750 mln Eurobond issue in a climate of improving credit ratings and a nod of approval from the Troika of international lenders who have implemented an economic adjustment programme, similar to bailouts in Ireland, Spain, Portugal and Greece.
The announcement by John Hourican follows Monday’s board decision to seek a total €1.1 bln capital increase from the likes of the European Bank of Reconstruction and Development and US-based venture capitalist Wilbur Ross, as well as other investors from Cyprus, the EU, Russia and the US. It is believed that about €800 mln of that amount will be in the hands of strategic investors.
With the issue of 4.17 bln new shares at 24c each and a further 4.7 bln in existing shares, the new investors will control about 47% of the bank’s capital, with EBRD’s €120 mln resulting in a 5.6% stake, while institutionals headed by WL Ross & Co LLC have pledged to take up €400 mln and thus become the biggest group of shareholders controlling about 18.8% of the capital and a significant board presence.
In all, €1 bln of the capital increase has been allocated to old and new investors, of which 20% reserved for a ‘clawback’ second phase offered to existing shareholders, but for a minimum bid of €100,000. A further €100 mln will be offered pro-rata to old shareholders, many of whom have seen their holdings diluted after several recapitalisation plans and a ‘bail in’ of depositors in exchange for equity.
CEO Hourican said that that the basket of new investments, as well as the €950 mln boost from the government, having been burdened with now-defunct Laiki Bank’s European Liquidity Assistance obligations, will put the bank’s capital adequacy on a solid footing of about 15.1% of core tier 1 capital, making it one of the “best capitalised” banks in the euro area, in time for the EU-wide stress-tests of 128 systemic banks in October.
SEE RELATED: EBRD, WL Ross eye half of BOCY €1 bln cap issue
EDITORIAL: Yet another “new era” dawns for Bank of Cyprus
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