KEDIPES recorded highest cash inflow since it began operation

State-owned asset management company, KEDIPES, announced cash inflow of €439 million in 2022, the highest performance since it began operation in September 2018 while it paid the state €310 marking the highest annual payment since 2018.

However, Lambros Papadopoulos, chairman of KEDIPES warned that continued suspension of foreclosures have affected the operation of the company “with expected negative impact on restructuring solutions and cash inflows for the first quarter of 2023.”

Papadopoulos thanked the Parliament for not further extending the suspension of foreclosures expressing hope that the problem of successive extensions will be solved “with a comprehensive solution which would allow the legal and regulatory framework, including foreclosures, to operate smoothly, so that we would be able to deal with no cooperative borrowers and strategic defaulters which constitute a significant part of our portfolio.”

KEDIPES was established following the sale of the former Cyprus Cooperative Bank (CCB) to Hellenic Bank, with a mandate to wind down non-performing exposures held by the CCB. KEDIPES’ aim is to manage these loans and real estate with a view to repay €3.5 billion of state aid paid by the Cypriot government to facilitate the transaction.

According to Papadopoulos, cumulative restructuring solutions provided by KEDIPES since September 2018 amounted to €1.3 billion, while total payment to the state amounted to €880 million corresponding to 25% of state aid, while real estate properties with a value of €140 million have been transferred to the government.

In the fourth quarter of 2022 cash inflows amounted to €114.1 million marking an increase of 22.5% compared with the previous quarter and broadly unchanged compared with the respective period of 2021. Furthermore, property sales amounted to €528 million.

Cumulative cash inflows since KEDIPES began operation amounted to €1.66 billion, with total deleveraging amounting to €2.67 billion.

Total assets under management in end-2022 amounted to €5.56 billion (excluding interest capitalisation and write offs) with total deleveraging amounting to 32%, KEDIPES added.

Total expenditure amounted to €476 million, with staff costs at €76.8 million.

Papadopoulos said that the duration and scope of the state aid repayment will be affected by the implementation of the mortgage-to-rent scheme, promoted by the government in a bid to assist vulnerable non-performing home owners.

The scheme has been approved by the previous government and will put into force following an approval by the European Commission’s Directorate-General for Competition on the basis of state rules.

Under the scheme KEDIPES will acquire primary residences with a value up to €250,000 pledged as collateral for non-performing loans. The government will pay the rent for these borrowers for 14 years. The borrowers will transfer the position of the property to KEDIPES and will be entitled after 5 years and before the end of 14-year period to submit a proposal to buy the house back.

Furthermore, KEDIPES announced that in the context of rising interest rates it will subsidise the interest rates so that the interest rate for restructured and performing loans for house purchase and other loans will not exceed 3.5% and 4.0% respectively in 2023.

“We understand the strong pressures on the income of households and businesses due to the impact of rate hikes, as they affect their capacity to maintain current restructurings viable,” Papadopoulos said.

He also expressed hope that KEDIPES will announce additional measures in a bid to relieve pressures to prudent borrowers from the continued interest rate hikes.