By Elias Hazou
New York-based hedge fund Third Point, a major shareholder in Hellenic Bank, has moved to strengthen its position in the lender by purchasing convertible bonds held by the Archbishopric.
This week the bank announced on the stock exchange that Third Point and its associated companies bought, off-floor, €7.7m worth of convertible bonds from the Archbishopric at a discount price of €5.5m.
Prior to the transaction, bank shareholders held in total €126m in series 2 convertible bonds, of which €24m were held by the Archbishopric. Following the transaction, the Archbishopric now has €16.3m in convertible debt.
Third Point’s acquisition of convertible bonds will raise its stake in the bank on conversion of the debt to equity. The hedge fund currently owns 22.5 per cent of Hellenic, as does video-game company Wargaming.net. Investment company Demetra owns 11.4 per cent of the stock, and the Archbishopric -once the biggest shareholder – about 7 per cent.
The bank is said to be planning a capital increase in the near future. Hellenic shareholders last week approved the appointment of a new board of directors.
Asked about Third Point’s move, economist Dr. Stelios Platis said it represents a vote of confidence in the bank.
“Hedge funds buy low and sell high. It looks like they expect the bank to return to profitability,” he said.
As far as the Archbishopric is concerned, the offloading of convertible bonds points to the need to swiftly raise cash. The Church’s cash-flow problems are well known.
In late February Hellenic announced the conversion of €86m in convertible bonds to shares due to the fact that its tier 1 capital ratio had fallen below the 9 per cent mandated threshold. The conversion to shares diluted existing stock, reducing the nominal stake of Third Point and Wargaming from 29.75 per cent to 22.5 per cent each, and Demetra’s from 15 per cent to 11.4 per cent.
That conversion raised tier 1 capital from 7.3 per cent to 9.3 per cent. The bank had slipped below the 9 per cent threshold as a result of €191m in losses posted for 2013.
Earlier, in November 2013, Hellenic completed its recapitalisation through private funds after three major investors poured in €100 million, taking 75 per cent of the share capital.
Wargaming and Third Point got a 30 per cent stake each by putting in €40m apiece. Demetra received 15 per cent with €20m.
A Russian business publication reported at the time that Wargaming probably had funds in the bank that got frozen and needed to buy into the bank to be able to withdraw them.
A due diligence of the banking system by investment firm Pimco had found that Hellenic needed some €294m in extra equity to meet core capital adequacy requirements.