* Escapes gov’t support; 240 mln rights to strategic investors *
The Bank of Cyprus raised 594 mln euros in fresh funds from the exercise of a rights issue and the conversion of its Coco bonds, escaping the need for any government support.
The new funds are part of the bank’s efforts to ensure a 1.56 bln cushion demanded by the EBA to cover its shortfall in Core Tier 1 capital due to its exposure to Greek toxic bonds.
The bank said that 160 mln of its target 394 mln euros worth of rights were exercised until Monday’s deadline, while 434 mln of Cocos from the initial target of 600 mln were converted by shareholders. This will result in the issue of 898.6 mln new shares, increasing the issued share capital to 1.8 bln shares.
The bank’s board will now decide how to dispose of the 238 mln euros worth of unexercised rights to new shareholders and strategic investors at the same price as the public issue or higher no later than June 18.
These fresh funds, in addition to the 80 mln euro benefit from the sale of its Australian subsidiary, as well as the anticipated 300-340 mln euros in profits that the bank would normally report, should give it the 1.56 bln security needed to meet the EBA demands.
“The bank is satisfied with the result despite the adverse market conditions. We remain within target of our capital building exercise,” Group CEO Andreas Eliades was quoted by local radio stations as saying.
Subject to securing the remaining funds, the bank may see an upgrade by the rating agencies, if, however, the Cyprus sovereign ratings are also raised by summer.
In effect, the bank will not need to resort to the Central Bank of Cyprus for support, even though the Governor and the outgoing Finance Minister have already stated that the three Cypriot banks are “solid”.
Laiki has an AGM on April 2 where shareholders and potential new investors will be asked to contribute some 1.8 bln through a rights issue, while older convertible bonds will be returned and re-issued, possibly with warrants attached. One of the names being mentioned as a potential new investor is the Russian state-controlled VTB colossus, owner of the Russian Commercial Bank that already operates in Cyprus.
Hellenic Bank, that has maintained a conservative approach to investments in Greece, and at the same time has refrained from expanding its retail operations there, may also proceed with some capital raising exercise, but at a smaller scale. The Church-controlled bank has already written off about 70% of its 110 mln exposure to Greek government bonds, while it has no other significant losses in Greece.
