Greek lender Eurobank's share offering to fill a capital shortfall revealed in a European Central Bank health check was oversubscribed with orders reaching 2.6 billion euros ($2.77 billion), two officials at the bank told Reuters.
Greece's third-largest lender was looking to raise up to 2.04 billion euros from investors.
"Orders from domestic investors reached about 300 million euros," one of the bankers said, declining to be named.
Eurobank, Alpha Plug Capital Gap as Greece Gets Bailout Deal
Nikos Chrysoloras nchrysoloras
November 17, 2015 — 3:19 PM EET Updated on November 17, 2015 — 5:31 PM EET
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Two Greek banks can cover capital gap without state funds
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Government reaches agreement with creditors on aid tranche
Greek lenders Alpha Bank AE and Eurobank Ergasias SA expect to raise enough money from investors to cover capital shortfalls without state aid, while the government reached a deal with creditors that will help backstop the recapitalization of two other banks.
The terms of the government’s financing agreement will be submitted to the Greek parliament for a vote set for Thursday night, Finance Minister Euclid Tsakalotos said. National Bank of Greece SA and Piraeus Bank SA have said they will probably seek state aid as they try to plug part of their capital holes by tapping private investors.
The creditor deal, with representatives of the European Commission, the European Central Bank and the International Monetary Fund, was “absolutely necessary to prepare bank recapitalization,” EU Economic and Monetary Commissioner Pierre Moscovici told reporters in Brussels.
State aid to the banks will come in the form of common shares and contingent convertible bonds issued to the government-owned Hellenic Financial Stability Fund. HFSF will borrow the required funds from the European Stability Mechanism, subject to the fulfillment of the conditions detailed in Greece’s latest bailout agreement.
Share prices have plunged amid uncertainty
Alpha said in a statement that it received institutional demand greater than its 1.55 billion-euro ($1.65 billion) equity capital raising target. Combined with 1.01 billion euros in proceeds from a debt-to-equity swap, the bank has enough to cover a shortfall of about 2.6 billion euros identified in ECB’s stress test last month.
Eurobank’s capital increase attracted investors including Fairfax Financial Holdings and Wilbur Ross, who committed about 2 billion euros of capital via a share sale and a so-called liability management exercise, consisting of debt-to-equity swaps, according to an update on the sale seen by Bloomberg News. The lender is scheduled to close its book to bids on Tuesday afternoon, aiming to cover the full shortfall identified by the ECB.
Greek lenders cleared the hurdle of a pan-European review in 2014 thanks to capital increases of more than 8 billion euros and restructuring plans approved by the European Commission. Then their solvency was put to the test when the government of Alexis Tsipras rejected the terms attached to the country’s bailout lifeline. The standoff resulted in the imposition of capital controls and restrictions on ATM withdrawals, as well as a month-long forced bank holiday in July, before Tsipras finally capitulated to creditors’ demands.
Bank Losses
The quarrel took a toll on lenders, which reported widening losses amid increases in bad loans, subdued economic activity, expensive emergency-funding requirements from the ECB, and strict limits on capital transfers. As they seek to raise fresh capital from markets for the second time in less than 20 months, uncertainty over the government’s talks with creditors damped investor interest.
Orders from investors for National Bank of Greece and Piraeus Bank’s share sales were coming in at the lowest price that the banks could accept, people familiar with the increase said on Monday. The bids offered for new shares reflect discounts of more than 90 percent compared to where the stocks currently trade, as the country’s two biggest lenders try to cover a combined hole of about 8.6 billion euros.
“In the summer, the pressure came from the threat of Grexit,” Tsakalotos said after announcing the deal with creditors. “This time it was the bank recapitalization, which created an asphyxiating framework on our side.” European and national rules on state aid to banks require “burden sharing” from stakeholders before taxpayer money is used.
Greek stocks rallied following the news of the creditor deal, with the benchmark Athens Stock Exchange general index closing up 2.2 percent. Bank shares fell 7 percent to a record low, this year’s decline to about 85 percent.
Greece ends stand-off over €86bn rescue
Peter Spiegel in Brussels
The Greek government and its European bailout negotiators have reached a tentative agreement that overcomes the first serious stand-off over Athens’ new €86bn rescue, clearing the way for the release of €2bn in aid and the restructuring of the country’s teetering banks.
The agreement, which was held up for more than a week over how much protection homeowners in mortgage default should get from foreclosure, is expected to be finalised on Thursday when Athens passes all the legislation required.
Bailout monitors had demanded the foreclosure law be finalised as part of the deal in order to ensure the €10bn in bailout assistance that is to be released to recapitalise the financial sector is not squandered.
There is a widespread belief among creditors that many of the non-performing loans in Greek banks can be blamed on so-called “strategic defaulters”, who are able to pay off their mortgages but choose instead to resort to Greece’s complicated legal system, which puts off a decision on foreclosure for years.
But Athens resisted a narrowing of the rules, arguing it had already conceded on a wide range of measures that lowered the value of houses covered under the legal protections and the income of individuals who could claim hardship.
“It was not the most simple discussion,” said Pierre Moscovici, the EU’s economic chief. “We’re conscious of the necessity to protect the most vulnerable and poor people in Greece.”
Under the complex compromise, about 25 per cent of homeowners would retain significant protections. In the future, the new income ceiling would allow about 60 per cent of households to be given more limited protection.
“We fought till the last moment to protect the primary residences not only of the poor people but also for middle-class mortgage borrowers,” said a senior Greek official. “We did our best to protect social cohesion and stability.”
If Athens is able to pass the legislation on Thursday, eurozone finance ministers are expected to sign off on the aid tranches by the weekend.
Although the stand-off is just one in a series of similar disputes between Athens and its lenders, the negotiations had significant urgency because of the need for Greece to complete its bank recapitalisation by the end of the year.
If the process slips into 2016, new EU rules come into effect that would make large deposits in Greek banks available for authorities to seize to help defray the cost of the rescue. EU officials said the new agreement should allow the recapitalisation process to be completed before the end of the year.
Greek Banks' Share Sales Said to Draw Orders at Minimum Levels
Nikos Chrysoloras nchrysoloras
November 16, 2015 — 6:08 PM EET Updated on November 16, 2015 — 8:15 PM EET
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Lenders seek to sell new shares following ECB stress test
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Minimum subscription price would wipe out existing stock value
National Bank of Greece SA and Piraeus Bank SA are drawing orders from investors at the lowest price at which they’re allowed to sell shares, according to people familiar with the capital increases.
Pricing at that level could mean discounts of more than 90 percent compared with the stocks’ market prices, said the people, who asked not to be named because order-taking continues and bids may still come in at higher prices.
Alpha Bank AE, which is also selling stock, has received orders for all the shares that are on sale, said Chief Financial Officer Vassilios Psaltis. Eurobank Ergasias SA, National Bank and Piraeus have yet to cover the share sales, two people said.
In a year that has been fraught with political uncertainty, forced bank holidays and a market shutdown amid a government standoff with creditors, the lenders are asking investors for new capital for the second time in less than 20 months. The people said that investors so far are reluctant to place orders and the success of the exercise will depend on whether the country’s government strikes a deal with creditors this week, which will restore the normal flow of public funds to backstop the recapitalization process.
Stock Decline
“The market is placing a lot of emphasis on whether the Greek government can reach an agreement with Europe to clear the way for more funds,” said George Athanasakis, equity sales director at Pantelakis Securities SA in Athens. “That doesn’t make for a very optimistic mood in which to seek new investors. Share prices have come down a lot, which points to a big dilution for existing shareholders.”
Greek banks, which plan to shore up their capital before the end of the year, are heading for their biggest annual decline since at least 1996, according to data compiled by Bloomberg. The country’s benchmark ASE Index has tumbled 22 percent in 2015, one of the worst performing in the world.
The country’s four largest banks are selling stock to fill part of a 14.4 billion-euro ($15.4 billion) hole in their accounts identified by the European Central Bank. The state-owned Hellenic Financial Stability Fund will contribute the rest, with loans from Greece’s latest bailout, but not before the government agrees with creditors on a set of so-called milestones attached to its aid agreement.
If banks are unable to raise funds from money managers, they may be resolved, leading to their nationalization.
Piraeus may sell new shares at the minimum regulatory price of 30 euro cents apiece, two of the people said. According to the bank’s Nov. 9 presentation, that will follow a reverse stock split that will bundle existing shares. At 30 cents, the price would be about 93 percent lower than the market price.
Reverse Split
Similarly, National Bank of Greece has announced plans for a 15-for-1 reverse stock split. A price set at 30 cents, the lowest price it can sell stock for, would imply a 95 percent discount.
Eurobank and Alpha Bank, the two smaller of Greece’s systemic lenders are also trying to cover the capital gap with measures including a debt-for-equity swap offer to bondholders. Eurobank has demand from investors for 75 percent of its total capital gap, according to a deal update sent to investors earlier Monday.
Stock investors can see their holdings almost wiped out as companies reorganize. Platinum miner Lonmin Plc is selling billions of new shares at a 94 percent discount, after warning investors that it might shut down if they didn’t approve the stock sale. Spanish gambling company Codere SA’s restructuring deal last year included an asset swap where bondholders ended up owning 97.8 percent of the company’s total equity.
Talks between the Greek government and representatives of the European Commission, the ECB and the International Monetary Fund during the weekend failed to reach a successful conclusion and are set to continue through Tuesday. The negotiations have progressed though, and euro-area officials may be able to decide on releasing aid payments to Greece as soon as Friday, according to two separate officials.
National Bank of Greece is seeking to raise 1.46 billion euros by selling stock and through a debt swap offer, according to a bourse filing late Monday. The remaining shortfall, totaling about 3 billion euros, will be covered with public funds from the HFSF, following a bail-in of existing stakeholders including the Greek state itself, which holds preference shares in the country’s biggest bank.
