Co-op recipient of considerable investor interest (Update-2)

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(Adds executive comment in sixth paragraph)

By Stelios Orphanides

The Cyprus Cooperative Bank said that it received a “considerable number” of applications expressing interest in buying either part of its shareholding or its assets.

“The applications expressing interest have been submitted by both global entities as well as domestic entities representing strategic and financial investors,” the lender said on Thursday, hours after the expiration of a deadline. “Possible investors have expressed interest both in a small controlling investment in the bank as a whole as well as the acquisition of assets, liabilities and the network of the bank, via a smooth asset transfer”.

“Following a thorough screening and the submission of related documents, the selected potential investors will gain access to further financial and operational data,” the lender said.

The bank, struggling with a €6.5bn mountain of non-performing loans, roughly half its loan portfolio and facing the need of further increasing its provisions for loan impairments that threaten to wipe out much of what was left from the €1.7bn in fresh capital injected by the government after the 2013 banking crisis, did not reveal additional information about the identity, the number or the origin of the investors who expressed their interest.

“We have received considerable investor interest and through a substantial number of applications and we are particularly satisfied about it,” Nicholas Hadjiyiannis, the lender’s chief executive officer was cited as saying.

Yiannos Stavrinides, head of communication and strategy of the bank said in a telephone interview that the bank attracted interest from at least two strategic investors and at least two financial investors, as well interest from other licenced investors to buy assets, including the bank’s non-performing business.

“Time remain frozen for us until this day,” he said. “What remains is of procedural nature”.

Earlier, he said that the completion of the current stage in the procedure would signal the beginning of the next phase which involves the submission of binding offers, which is expected to be completed by the end of May.

On Tuesday, Moody’s Investors Service cut the bank’s baseline credit assessment by two notches to ‘ca,’ which may have caused further insecurity among depositors.

The bank witnessed “some activity,” attributed to the customer concern about the outcome of the current procedure, announced on March 19, Stavrinides said.

The bank’s decision to announce that it and its assets were up for sale, prompted a backlash from opposition politicians and parties traditionally rejecting reforms, on fears the privatisations of the Co-op would equal a sell of or lead to the foreclosure of primary homes of borrows unable to repay their mortgages after being hit by the crisis.

On Thursday, the members of the audit and finance committees of the Parliament decided to postpone the second debate on the Co-op’s step to seek private investors, after debating the matter a week ago.

The Co-op, the second largest bank in Cyprus with a network of less than 200 branches, exhausted all margins of receiving additional state aid. It posted in 2016 a net profit of €7.1m against a loss of €176.4m in 2015. In the first nine months of 2017, it generated a net loss of €28.6m. The bank’s loan portfolio is granular, i.e. it has extended a large number of relatively small loans to retail customers.

The Co-op which has appointed Citigroup Global Markets Ltd to assist it in its efforts in attracting investors, said that Citigroup, licenced by the (UK) Prudential Regulation Authority (PRA) supervised by both the PRA and the Financial Conduct Authority, is not liable to any third party other than the Cyprus Cooperative Bank with respect to protection afforded to customers as part of its consultancy services.

“Neither this notice nor the release of any confidential information to an interested party constitutes, or may be used for, any offer to sell or a solicitation of an offer to subscribe for or purchase any securities by any person in any jurisdiction or under any circumstance where it is unlawful to make such an offer or solicitation,” the Cyprus Cooperative Bank said. “The distribution of this notice in certain jurisdictions may be restricted by law, and recipients should inform themselves about, and observe any applicable legal or regulatory requirements in relation to, the distribution or possession of this notice”.

Neither the Co-op, “Citi nor their or their affiliates’ respective directors, officers, employees, advisers or agents accept any liability to any person in relation to the distribution or possession of this invitation in any jurisdiction,” it added.

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Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]