Filenews 18 January 2021
In an agreement to sell non-performing loans with PIMCO under Helix 2, the Bank of Cyprus proceeded.
According to a notice on the Cyprus Stock Exchange, an additional NSM portfolio with a gross book value of €545 million was sold.
This is the announcement
Following the Agreement on the Sale of Non-Performing Loans ('NSRs') announced on 3 August 2020 ('Helix 2 Portfolio A'), Bank of Cyprus Holdings Public Limited Company ("BOCA Holdings" and, together with its subsidiaries, the "Group"), has reached an agreement with investment funds affiliated with Pacific Investment Management Company LLC ("PIMCO") for the sale of an additional portfolio of non-performing loans ("Portfolio B") with a gross book value of €545 million.1 million. ,2 ('Helix 2 Portfolio B', or the 'Transaction').
Portfolio B has a contractual balance of €783 million and consists of approximately 16,000 loans, mainly private and small and medium-sized enterprises, which are secured with approximately 4,000 properties. The net book value of the assets sold amounts to €244 million. 1 The gross selling price is 44%1 on the gross book value or 31% of the contractual balance and is payable in cash, with 50% payable at the completion of the Transaction and the remaining 50% deferred until December 2025 without any conditions. The price can be further increased through a earnout mechanism, which depends on the performance of Portfolio B. The Transaction is another milestone in achieving one of the Group's strategic objectives of improving the quality of the loan portfolio through the reduction of NSOs.
The Transaction reduces NSEs by 22%1.4. Overall, the decrease in NSLs for the year 2020 amounted to €2.1 billion, reducing NSLs to €1.8 billion4 and the NSN rate to loans to 16%4 , taking into account Helix 2 (Portfolios A and B) and an organic NSN reduction of around €600 million. Upon completion, the Transaction is not expected to have a significant impact on the Group's capital position. With the payment of the deferred price and without taking into account any positive effect from the earnout, the Transaction is expected to have a positive impact of 14 b.1 on the Group's Common Equity Tier 1 ratio. The loan credit loss for Portfolio B, expected to be recognised in the fourth quarter 2020 results, is estimated at around €27 million.
The completion of Helix 2 Portfolio B will be implemented together with the completion of Helix 2 Portfolio A and is expected early in the second half of 2021. Integration is subject to a number of sects, including normal supervisory and other approvals. After a transitional period during which the management of the loans will remain with the Bank, the intention is that the management of both Portfolios be transferred to an independent loan management body (servicer), which will be selected and appointed by the buyer. PIMCO is one of the world's leading fixed income investment managers. With its creation in 1971 in Newport Beach, California, PIMCO introduced to investors a total return approach to fixed income investments. In the 45+ years since, the company has continued to offer innovation and know-how in its cooperation with clients looking for the best investment solutions.
Today PIMCO has offices around the world and 2,900+ professionals joining them in one purpose: Creating opportunities for investors under any circumstances. PIMCO is owned by Allianz SE, a leading globally diversified financial services provider.
Panikos Nikolaou, Group CEO, commented: "We are pleased today to announce the signing of the agreement to sell Helix 2 Portfolio B, another milestone in achieving our strategic goal of reducing risk on the balance sheet. Despite ongoing difficult market conditions, the Bank has signed agreements to sell NSLs of €1.4 billion over the past six months (Helix 2 Portfolios A and B).
As a result of our actions to reduce risk on the balance sheet, we have achieved a reduction in NSOs by €2.1 billion in 2020, from €3.9 billion to €1.8 billion, and a reduction in the NSD rate towards loans from 30% to 16%4 . Overall, we reduced NSEs by €13.2 billion, or 88%4 , from the high level of 2014, and the NSM rate to loans by 47 percentage points4 , from 63% to 16%4 . As part of our broader strategy to create value for shareholders, in line with our medium-term strategic objectives announced with the financial results for the nine months ended September 30, 2020, we remain focused on further reducing risk on the balance sheet and will continue to look for solutions, organic and non-organic, with the aim of reducing the NSN rate on loans to single digits by the end of 2022.
We will continue to assess the prospect of accelerating the decline in NSEs through further NSD sales in the future. We are now in a better position to manage the challenges arising from the ongoing crisis from the spread of COVID-19 and to support the recovery of the Cyprus economy." , and Chrysafini and Polyviou DEPE as the Bank's main legal advisers on Cyprus Law in this Transaction.
