Investor Wilbur Ross and Tyrus Capital, who head a group of investors that pumped 400 mln euros into Bank of Cyprus, announced a new slate of directors for election to the bank’s board at the annual meeting of shareholders on November 20, with former Deutsche Bank CEO Josef Ackermann (photo at left) expected to take the chair.
According to an announcmenet issued in New York, the new board “has been selected to add financial expertise and will better reflect the shareholder base following the recent stock issuance.”
Following a three-tier capital increase for a total of 1 bln euros, Ross and his co-investors will control about 19% and the EU’s ‘merchant bank’, the European Bank for Reconstruction and Development, a further 5% after pumping in 120 mln.
The new board deposes current chairman Christis Hassapis, a University of Cyprus economics professor who stepped in last September on the behest of major local investor groups, while the number of the original Russian and Ukrainian directors has been slashed from six to one.
The proposed members of the new board are Dr. Ackermann (non-executive Chairman), Wilbur L. Ross Jr., Chairman of WL Ross & Co. and Vladimir Strzhalkovskiy, the current vice Chairman (Vice Chairmen); Arne Berggren, nominated independently by the EBRD; Maksim Goldman, a Director of Strategic Projects at Renova; John Hourican, CEO of Bank of Cyprus; Christakis Patsalides, Finance Director of the bank; Michael Spanos, former director of the Central Bank of Cyprus; Ioannis Zographakis, Chairman of the bank’s audit committee; and Marios Kalochoritis, member of the board of directors.
All board memberships are naturally subject to approval by the Central Bank of Cyprus.
Just two weeks ago, the Bank of Cyprus board decided to call for a shareholders’ meeting on November 20, but did not add any further details, such as when the present board would step down.
Central Bank of Cyprus Governor Chrystall Yiorkadji had sent a stern letter to the board days earlier directing them to resign and seek re-election, if they wish, at a shareholders’ meeting after the latest company restructuring.
The board had initially asked the centralbanker to vet billionaire Ross, who, together with other investors is pumping 400 mln euros into the island’s biggest lender as part of the 1 bln recapitalisation approved last month.
Yiorkadji reportedly replied that instead of adding Ross as the 14th member to the current 13-strong board, that they should all resign and seek re-election at an upcoming shareholders’ meeting.
At the time, it was unclear if the EBRD would also seek a board representation, to ensure that its investment of 120 mln euros is in check.
The centralbanker also warned the board to refrain from taking any executive decision that would impair the bank’s activities or burden a future management with unnecessary responsibilities.
As a parting gift, the current board had to approve the final part of its recapitalisation plan, to include 100 mln euros worth of shares offered to retail and old investors at 24c each, as was the case with institutional investors, with the total recapitalisation adding up to 1.1 bln. Once this is completed, the bank's adjusted share register will determine the new ownership and the stock will be ready to resume trading on the Cyprus Stock Exchange.
Shareholders controlling more than the 5% threshold include the ‘Legacy Laiki’ of the dissolved Laiki Popular Bank at 9.6%, two funds introduced by Ross – Renova Group with 5.46% and TD Asset Management with 5.23% – and the EBRD, with a holding of 5,021%.
It was also expected that the November meeting will elect a new board, but it was not clear which of the present directors would seek re-election.
The recapitalisation came about from the issue, initially by private placement to strategic investors, of 4.17 bln new shares at 24c each, the same price offered to all three categories of new, existing and old shareholders. As a result, the bank’s issued share capital now comprises 8.9 bln ordinary shares with a nominal value of 10c each.
In statements after the last shareholders’ meeting at the end of August, when the bank announced a total of EUR 81 mln in post-tax profits for the first half (Q1: 31 mln), CEO John Hourican had said that approval of the capital increase would boost the bank’s liquidity ratios far beyond the requirements of the European Banking Authority’s stress-test scenarios.
The Group’s capital position was strengthened with Core Equity Tier 1 ratio increased from 10.5% in end-December to 11.3% as at June 30. Combined with last month’s decision on the EUR 1 bln capital increase, the bank’s Core Equity Tier 1 ratio is now expected to hover at 15.6% (transitional basis) and 15.1% (fully-loaded basis) making it “one of the best capitalised banks in Europe,” the CEO had declared.
About EUR 900 mln raised from the capital increase has already returned to Frankfurt’s coffers as part of the bank’s efforts to reduce its exposure to high-interest Emergency Liquidity Assistance (ELA) to near or below 2 bln euros by the end of 2017.
