By Stelios Orphanides
Cypriot taxpayers may have to foot a bill of up to €600m in order to allow the government to successfully complete the sale of the state-owned Cyprus Cooperative Bank, Haravgi reported on Friday.
The proposals submitted by Hellenic Bank, Cyprus’s third largest lender, and Apollo Capita Management, provide that in the best-case scenario the two bidders won’t have to pay anything to acquire the Co-op’s business, into which the government pumped more than €4bn over the past four years, the newspaper reported on its website on Friday without citing its source. One of the bidders, whose identity remains undisclosed, who initially demanded a payment of €1bn, agreed to limit his demands to €600m.
The government recapitalised the lender in 2014 with €1.5bn and injected another €175m in 2015. In April, the government issued almost €2.4bn in bonds to the Co-op and deposited €2.5bn receiving its non-performing loans, estimated at €6.3bn as collateral, in an attempt to soothe depositor concerns over the bank’s capital adequacy. The value of the collateral of the bank’s non-performing loans which exceeds half of its loan portfolio, is estimated at around €10bn, according to the finance ministry.
On May 4, economist Marios Clerides did not rule out that the taxpayers may have to cover the cost to compensate Co-op workers who might be affected by the takeover.
On Friday, Politis also reported that the lack of progress in the takeover negotiations also prompted the intervention of President Nicos Anastasiades who contacted parties involved, just like Finance Minister Harris Georgiades, while Central Bank of Cyprus governor Chrystalla Georghadji let Hellenic’s board of director know that new shareholders would have to join existing ones.
The governor’s intervention came as the additional equity required to absorb the Co-ops non-performing loans is estimated at €450m, with entertainment software developer Wargaming.net being reluctant to see its shareholding, slightly below one quarter, diluted, Politis also reported without saying where it got the information. Other potential investors, including Altas Merchant Capital, J.C. Flowers & Co., and also Apollo, indicated their preference for a controlling stake, the newspaper added.
The European Central Bank views that sale of the Co-op as an opportunity to resolve the non-performing loans issue, seen as a major threat to financial and economic stability, the newspaper continued.
The government said in its stability programme 2018 submitted to the European Commission last month that it aims at a reduction of non-performing loans in the banking system of currently around €22bn by one third by the end of the year through a three-pronged strategy which includes a stricter foreclosure and insolvency legal framework, and the setup of a vehicle that will absorb non-performing loans of vulnerable groups affected by the crisis and the sale of the Co-op.