Hellenic Bank completes Project Starlight, reduces NPE ratio to 3.6 per cent

Hellenic Bank this week released a statement announcing the completion of Project Starlight, which refers to the sale of a non-performing exposures (NPE) portfolio, combined with the sale of APS Debt Servicing Cyprus.

According to the announcement, this was a package transaction involving the securitisation of approximately €1.4 billion in NPEs, dubbed the Starlight Portfolio, on December 31 2022, and the sale of the bank’s servicing platform, APS Debt Servicer, to Themis Portfolio Management Ltd.

Themis Portfolio Management Ltd is an indirect subsidiary of Oxalis Holding, which is an entity managed and advised by Pacific Investment Management Company LLC (PIMCO).

Moreover, the bank explained that the transaction comprised the transfer of the Starlight Portfolio to Themis Portfolio Management Holdings Ltd, a Cypriot Credit Acquiring Company, and the subsequent sale of Themis to Oxalis, as well as the securitisation of the Starlight Portfolio and the issuance of Senior, Mezzanine and Junior notes,

The transaction also includes the acquisition of 95 per cent of the Mezzanine and Junior Notes by Oxalis, as well as 33.3 per cent of the Senior Note of the Securitisation, with the bank retaining 66.7 per cent of the Senior Note (approximately €113 million) and 5 per cent of each of the Mezzanine (approximately €4.5 million) and the Junior Notes.

Additionally, the transaction also comprises the sale of 100 per cent of the shares in the APS Debt Servicer to Themis Portfolio Management Ltd, a Cypriot debt management, recovery and property management company, owned by funds managed by PIMCO, for a total consideration of €373 million, as well as the signing of a long-term exclusive servicing agreement for the management of the residual NPE portfolio of the bank and any additional future defaults that might arise.

“The transaction has significantly de-risked the bank’s balance sheet by reducing its NPE ratio, excluding the NPEs covered by the Asset Protection Scheme (APS), to a pro forma ratio of approximately 3.6 per cent from 13.5 per cent on December 31 2022,” the bank said in a statement.

The bank explained that including the APS NPEs, the NPE ratio was reduced to a pro forma ratio of 9.8 per cent, from 19.2 per cent on December 31 2022.

“The frontloaded de-risking of the balance sheet allows the bank to normalise its cost of risk as well as to benefit from the interest income stemming from the 66.7 per cent retention of the Senior Note,” the bank added.

What is more, the bank stated that the transaction has a positive capital impact of approximately 0.8 per cent, with the pro forma CET 1 ratio rising to 19.1 per cent from 18.3 per cent on December 31 2022.

This reflects the effects of the portfolio deconsolidation, the bank’s investments in the Senior Note and the Mezzanine Note, as well as the gain relating to the sale of APS Debt Servicer.

Through the servicing agreement for the management of the bank’s residual NPE portfolio, as well as any future NPE formation, the bank said that it expects to achieve further NPE deleveraging from its partnership with PIMCO, given the latter’s long-standing experience and track record in the NPE sector in Europe.

Meanwhile, Hellenic Bank CEO Oliver Gatzke stated that the completion of Project Starlight heralds a new era for the bank.

“We have managed to substantially de-risk the bank’s balance sheet from NPEs, reducing the NPE ratio to a pro forma 3.6 per cent,” Gatzke said.

“This was a capital accretive transaction, while the bank’s participation in the financing of the Senior Note ensures an interest income benefit in the coming years,” he added.

Furthermore, the Hellenic Bank CEO said that through the sale of the APS Debt Servicer to Themis, the bank looks forward to its cooperation with PIMCO for the further deleveraging of the bank’s NPEs, noting that they stand to benefit from their experience and track record in NPE management.

“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,” Gatzke said.

“At a time of heightened volatility in the global markets, the bank’s financial fundamentals remain strong, with high levels of capital and ample liquidity, while the evolving interest rate environment is elevating the bank’s profitability,” he concluded.

The bank noted that Barclays Bank Ireland PLC, acting through its Investment Bank, acted as Hellenic Bank’s Lead Financial Advisor and Securitisation Sole Arranger.

PricewaterhouseCoopers acted as Technical Financial Advisor. Allen & Overy LLP and Clifford Chance, SLP advised on international legal matters, while Georgiades & Pelides LLC advised on Cypriot law matters. KPMG Limited provided Implementation Support Services.