Hellenic Bank on Monday announced that it has entered into an agreement for both the sale of a non-performing exposures portfolio, as well as the bank’s servicing platform APS Debt Servicing, to Pacific Investment Management Company LLC (PIMCO).
“This is a transformative transaction making a decisive step in dealing with the Bank’s NPEs, [since] the transaction substantially de-risks the bank’s balance sheet from NPEs, reducing the NPE ratio to a proforma 3.4 per cent,” Hellenic Bank CEO Oliver Gatzke said.
“The transaction was done in a capital accretive manner while the bank’s participation in the financing of the Senior Note will ensure an interest income benefit in the coming years,” Gatzke added.
The deal, dubbed Project Starlight, involves the sale of non-performing exposures (NPEs) worth a total of €1.32 billion.
Both the loan portfolio and APS Debt Servicing will be sold to Oxalis Holding SARL, an entity managed and advised by PIMCO.
“We have also successfully agreed to the sale of the APS Debt Servicer,” Gatzke explained, adding that “with this agreement and the disposal of our NPE portfolio, we can now focus on our strategic objectives of growing and transforming the bank for the benefit of our customers, our employees and our shareholders”.
Among other clauses pertaining to the securitisation of the Starlight loan portfolio, the transaction also involves the signing of a long-term exclusive servicing agreement for the management of the residual NPE portfolio of the Hellenic Bank and any additional future defaults that may arise.
Regarding the reduction in risk entailed by the agreement, this stems from an NPE reduction of €0.72 billion, resulting in a residual NPE portfolio of approximately €0.653 billion, of which €0.433 billion is covered by the Asset Protection Scheme (APS).
In addition, Hellenic Bank’s proform NPE ratio will fall from 21 per cent as of December 21 2021 to approximately 11.6 per cent.
The NPE ratio will also fall to approximately 4.4 per cent excluding the NPEs managed by APS Debt Servicing.
After taking into account the acquisition of a performing loan portfolio from RCB Bank, which took place on March 22 and had a gross book value of approximately €556 million, the proforma NPE ratio (excluding APS-NPEs) is further reduced to the aforementioned 3.4 per cent.
“The frontloaded de-risking of the balance sheet will allow the bank to normalise its cost of risk going forward as well as benefit from the interest income stemming from the 66.7 per cent retention of the Senior Note,” Hellenic Bank said in a statement.
The agreement has also added value to the bank, having a positive impact on Hellenic Bank’s CET1 ratio of approximately 15 basis points.
“The transaction has an overall positive capital impact on the CET 1 ratio of circa 15 bps based on December 20 financial numbers upon completion, taking into account the portfolio deconsolidation and the gain relating to the sale of the APS Debt Servicer,” the bank said.
“The transaction values the Starlight Portfolio at an implied price of €320 million, corresponding to a price to gross book value ratio of 41 per cent, which compares well with other similar transactions,” the bank added.
Regarding the long-term partnership for the management of the residual NPE portfolio, the bank said that the service-level agreement has an initial term of 10 years.
“The bank is expecting to benefit in achieving its NPE deleveraging targets from its partnership with PIMCO given the latter’s long-standing experience and track record in the NPE sector in Europe,” Hellenic Bank said.
Finally, the bank stated that the transaction is expected to close by the end of the current year and is subject to regulatory and antitrust approvals.