Hellenic offloads €1.3 bln in toxic loans deal

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Hellenic Bank is close to offloading the last of its Non-Performing Loans after sealing an agreement to sell a package of NPLs worth over a billion euros and its debt servicing platform APS.

The deal, called Project Starlight, involves the sale of non-performing exposures (NPEs) worth €1.32 bln to Oxalis Holding SARL, an entity managed by Pacific Investment Management Company LLC (PIMCO).

“This is a transformative transaction making a decisive step in dealing with the bank’s NPEs; the transaction substantially de-risks the bank’s balance sheet from NPEs, reducing the NPE ratio to a proforma 3.4%,” Hellenic Bank CEO Oliver Gatzke said in an announcement.

Gatzke said the disposal of the bank’s NPE portfolio and its servicing platform, the institution “can now focus on our strategic objectives of growing and transforming the bank for the benefit of our customers, our employees and our shareholders”.

According to the agreement, the transaction also involves signing a long-term exclusive servicing agreement to manage the residual NPE portfolio of the Hellenic Bank and any additional future defaults that may arise.

As a direct result of the deal, Hellenic Bank’s NPE ratio will fall from 21% as of December 21 2021, to approximately 11.6%.

With APS Debt Servicing also being sold, Hellenic will its debt ratio fall even lower to 4.4%.

The deal follows news of Hellenic taking over a performing loan portfolio worth €556 mln from now defuncted RCB Bank, which pushes its proforma NPE ratio to 3.4%.

“The frontloaded de-risking of the balance sheet will allow the bank to normalise its cost of risk going forward and benefit from the interest income stemming from the 66.7% retention of the Senior Note,” Hellenic Bank said.

The agreement has also added value to the bank, positively impacting its CET1 ratio of approximately 15 basis points.

“The transaction values the Starlight Portfolio at an implied price of €320 mln, corresponding to a price to gross book value ratio of 41%, which compares well with other similar transactions,” the bank added.

The transaction is expected to close by the end of the current year and is subject to regulatory and antitrust approvals.

Through funds belonging to its investment vehicle Poppy SARL, PIMCO owns 17.3% of Hellenic shares.

A reduction in risk stems from an NPE reduction of €0.72 bln, resulting in a residual NPE portfolio of approximately €0.653 bin, of which €0.433 bln is covered by the Asset Protection Scheme (APS).

According to Eurostat data, Cyprus has the EU’s highest stock of the general government’s non-performing loans (assets).

The share of non-performing loans to the country’s GDP stood at 28.3% in 2020, a far larger percentage than other EU states.