Cooperative Bank resumes process to attract investors

Cyprus Cooperative Bank (CCB) Ltd has provided access to a virtual data room in order to attract investors to the bank`s share capital, aiming to reduce the state`s stake in its ownership structure.

The difference from the previous privatization process is that the process of identifying interested parties for an investment has two options, either for the fully licensed bank entity, or all or part of CCB’s assets and liabilities.

The first option has to do with the participation to the bank’s capital, where the investor will acquire some or all of the share capital, with the state`s share falling as a result.

The second option, to acquire assets, is considered to help the participation in the share capital of the company. If an investor purchases part of the assets of the Bank, in particular from the non-performing loan (NPL) portfolio, then participation in the share capital of CCB will be easier, as the balance sheet of the bank is released from the NPLs burden and the projections it implies.

The deadline of this invitation for expressions of interest is on Thursday, March 29, 2018, by 12pm (London time).  After this period the interested investors will have time to register their binding offers. CCB  has appointed Citigroup Global Markets Limited as its exclusive financial adviser on the process.

"The process starts today. We are resuming the process that began in the autumn of 2017 with Citygroup, " said a bank official.
The same official said that the bank’s goal was to to select a potential investor before summer.

He also said that the timing for the start of the process was correct and followed the meetings between the bank and Citygroup with potential investors last December.

"All the components of a transaction are in place. We have an external loan servicer (Altamira), which acts as an additional incentive for loan acquisition and we now have a single entity after the merger of the different Cooperative Credit Institutions in 2017, "he added.

The same official also said that European Central Bank has completed its review of the CCB, a review that highlighted the problems arising from the fact that the majority of the bank’s NPLs concern first residences.  

He also noted that the existing institutional framework for addressing NPLs creates pressure to extend the recovery period for collateral beyond 7 years.

In 2017 CCB extended the collateral recovery period to 7 years, which cost € 150 million and absorbing its organic profitability.