Hellenic Bank announces main terms of capital enhancement plan

Hellenic Bank announced on Thursday the main terms of its capital enhancement plan in a bid to meet the Core Tier 1 nine percent (9%) requirement to be in place in the Cyprus banking sector as of September 2013, calling for an extraordinary shareholders meeting on August 17.

The Bank aspires to raise approximately €500 million.
According to a Hellenic Bank press release in the Cyprus Stock Exchange, the Bank’s Board of Directors decided to issue new shares amounting €168 million to current shareholders as well as to holders of non-cumulative capital securities.

The Board also decided to proceed with a voluntary swap of current convertible capital securities with new convertible capital securities amounting to €306 million.
The current convertible capital securities have an interest rate of 11% whereas the new convertible bonds will have a 10% interest rate.

The Bank clarified that the completion of the offer is conditioned upon at least 90% participation of the holders of capital securities and the bond holders of the Bank, although with the completion of the offer, the Bank may not request state aid.
Cyprus requested financial support from the EU bailout mechanism, after its two largest banks sought state aid following mammoth losses amounting to €4.5 billion due to the haircut of the Greek sovereign debt. Cyprus and its international lenders, namely the European Commission, the European Central Bank and the International Monetary Fund agreed last March on a €10 billion bailout, which featured a haircut on uninsured deposits to raise funds for the recapilitalisation of the two banks, which amounted to 10.6 billion.

Hellenic Bank, the island’s third largest lender, did not request state aid, although a due diligence audit, carried out in the Cypriot banking sector as part of the bailout agreement, showed that the bank needed €294 million to meet capital requirements namely the 9% of Core Tier 1 capital.