The Bank of Cyprus, the island’s largest lender that was forced last year to seize depositors funds and take over another bank, will be seeking new investors to beef up its capital base by about €1 bln in time for an EU-wide banking sector stress test in Autumn.
The bank’s board, headed by chairman Christis Hassapis, met on Friday after receiving instructions earlier in the day from Central Bank chief Chrystalla Yiorkadji and decided “to proceed with exploring investor interest for a potential capital increase. A capital increase aims to expedite the implementation of the Group’s restructuring plan in tandem with the further strengthening of the group.”
The board added that “the Group’s management will engage directly with institutional investors. A possible capital transaction will be structured in a way that allows the opportunity for existing shareholders to participate.”
This seems to have been the compromise that was sought between current shareholders and the central bank that warned several times during the past week that a capital increase was urgent in order to ensure the bank’s viability.
Christodoulos Angastiniotis, the chairman of the Cyprus Investment Promotion Agency, said on Thursday that there was interest from among U.S. and Russian investors.
The current board wanted more time to find a white knight of its own in order to secure shareholder representation through a ‘clawback’ programme that would allow existing stakeholders to set a target of 20-30% ownership over time so as not to see their investments diluted.
HSBC and Credit Suisse have been advising the Bank of Cyprus on its restructuring plan, including seeking new institutional investors through a private placement of shares, in which current shareholders also wanted the right to participate.
The bank’s board said it “will re-convene an ad-hoc meeting to resolve upon the final terms of any capital transaction. The terms of any capital transaction would be subject to the approval of shareholders at an Extraordinary General Meeting that would be convened as appropriate, pursuant to the provisions of company’s articles of association.”
“Following the completion of such transaction, the bank intends to seek a re-listing of its entire ordinary share capital on the Cyprus Stock Exchange and Athens Exchange,” from where it was suspended in April 2013.
The capital increase is expected to proceed over the next few weeks with roadshows planned in time for the ECB stress tests of 128 systemic banks within the Eurozone, all of which, bar the Bank of Cyprus, have secured additional capital.
