By Angelos Anastasiou
AT A MARATHON session that started at 10:30 am and lasted until late on Monday night, the Bank of Cyprus (BoC) board of directors announced the successful private placement of 4.17 billion new ordinary shares at a price of 24 cents per share, for a total capital raising of €1 billion.
Monday’s board session was convened to decide on the planned raising of €1 billion in capital, for which the offer book was “comfortably oversubscribed” before closing last Friday.
The board was set to assess the offers made and decide on which would be accepted, and at what price.
Initial information had foreign hedge funds and other institutional investors submitting offers for a significant stake in the lender. Interested parties reportedly include two major American hedge funds that submitted offers for a total €600 million stock purchase, as well as the European Bank for Reconstruction and Development (EBRD).
“The shares were allocated to a broad range of institutional investors from Europe, North America and Russia, including a number of international investors introduced by WL Ross & Co LLC and the European Bank for Reconstruction and Development,” the bank said in a statement.
Offers were reported to hover between 21 and 25 cents per share, a price that would signal the issuance of approximately 4 billion individual shares, while existing shareholders currently hold some 4.7 billion shares.
A €1 billion boost will see the BoC’s core-tier 1 capital soar to over 15 per cent, likely securing comfortable success in the European Central Bank’s upcoming eurozone-wide stress test. This figure will also position the lender “significantly ahead of European peers”.
Successful bidders – including eligible existing shareholders – will sign irrevocable commitments to their offers and the bank will call an Extraordinary General Meeting (EGM) of the shareholders to approve the increase, expected to be scheduled in August. To approve the issue, 75 per cent of shareholders present must vote in favour at the EGM.
The second phase of the capital issue will allow existing shareholders to apply for a maximum of 20 per cent of the stake offered to new shareholders at the same share price – according to the capital increase’s clawback provisions.
Existing shareholders that wish to participate in the clawback phase will be required to offer a minimum €100,000 investment.
The clawback phase will be open for a period of 15 business days starting July 31.
“The new shares to be issued […] will be unlisted at the time of issue,” the statement said. “However, the bank intends to proceed with the listing for the entire class of its ordinary shares on the Cyprus Stock Exchange and the Athens Exchange as soon as reasonably practicable. Admission of the ordinary shares to trading on these exchanges is expected to take place before the end of the year.”
An additional €100 million in new share capital will be made available to existing shareholders following the completion of the capital increase and prior to the introduction of the bank’s share to the Cyprus and Greek Stock Exchanges.
Following the board meeting, chairman Christis Hassapis said that “this successful placing will significantly strengthen the bank’s capital position and is an essential step in the restructuring of the group”.
“The strengthened capital position will improve stakeholders’ confidence in the bank and enhance funding options available to the bank,” Hassapis said. “The fact that high calibre institutional investors were interested and participated successfully in this exercise is a testament to their confidence in the bank and also in the economy of Cyprus.”
BoC CEO John Hourican said that “the success of the private placing demonstrates the confidence that international institutional investors have in the bank’s turnaround and the economic recovery in Cyprus, only a year after the bank exited resolution status.”
“We are delighted with the quality of investors and the broad investor base including international investors introduced by WL Ross, the EBRD as well as other institutional investors which we believe have a long-term view,” Hourican said. “This significant investment, which is the biggest single foreign direct investment into Cyprus, will help to ensure that Bank of Cyprus becomes one of the best capitalised banks in Europe.”