Talks mired as buyers ask taxpayers to foot Co-op bill, reports

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By Stelios Orphanides

Cypriot taxpayers may have to foot a bill of up to €600m in order to allow the government to successfully complete the sale of the state-owned Cyprus Cooperative Bank, Haravgi reported on Friday.

The proposals submitted by Hellenic Bank, Cyprus’s third largest lender, and Apollo Capita Management, provide that in the best-case scenario the two bidders won’t have to pay anything to acquire the Co-op’s business, into which the government pumped more than €4bn over the past four years, the newspaper reported on its website on Friday without citing its source. One of the bidders, whose identity remains undisclosed, who initially demanded a payment of €1bn, agreed to limit his demands to €600m.

The government recapitalised the lender in 2014 with €1.5bn and injected another €175m in 2015. In April, the government issued almost €2.4bn in bonds to the Co-op and deposited €2.5bn receiving its non-performing loans, estimated at €6.3bn as collateral, in an attempt to soothe depositor concerns over the bank’s capital adequacy. The value of the collateral of the bank’s non-performing loans which exceeds half of its loan portfolio, is estimated at around €10bn, according to the finance ministry.

On May 4, economist Marios Clerides did not rule out that the taxpayers may have to cover the cost to compensate Co-op workers who might be affected by the takeover.

On Friday, Politis also reported that the lack of progress in the takeover negotiations also prompted the intervention of President Nicos Anastasiades who contacted parties involved, just like Finance Minister Harris Georgiades, while Central Bank of Cyprus governor Chrystalla Georghadji let Hellenic’s board of director know that new shareholders would have to join existing ones.

The governor’s intervention came as the additional equity required to absorb the Co-ops non-performing loans is estimated at €450m, with entertainment software developer Wargaming.net being reluctant to see its shareholding, slightly below one quarter, diluted, Politis also reported without saying where it got the information. Other potential investors, including Altas Merchant Capital, J.C. Flowers & Co., and also Apollo, indicated their preference for a controlling stake, the newspaper added.

The European Central Bank views that sale of the Co-op as an opportunity to resolve the non-performing loans issue, seen as a major threat to financial and economic stability, the newspaper continued.

The government said in its stability programme 2018 submitted to the European Commission last month that it aims at a reduction of non-performing loans in the banking system of currently around €22bn by one third by the end of the year through a three-pronged strategy which includes a stricter foreclosure and insolvency legal framework, and the setup of a vehicle that will absorb non-performing loans of vulnerable groups affected by the crisis and the sale of the Co-op.

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About Author

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

  • Mist

    No prosecutions yet?

  • Chris Georgiou

    Taxpayers need to pay for Bankers mistakes again? Why are these idiots not in prison?

    • SuzieQ

      A very good question!

  • A is B

    Why dont they just take the depositors money as they did in Laiki, its not a Russian Bank so Putin wont threaten to bankrupt your country

    • Kevin Ingham

      Because Cyprus does not have the money to guarantee deposits below Euro 100,000.

      If that “EU guarantee” (which is only guaranteed at/by national level) was breached we would have a run on every insolvent bank in the EU (and Italy has lots of those)

  • Bob Ellis

    As the bank is being sold, why can’t the proceeds of the sale be used ? or is that too sensible or bleeding obvious ? As a taxpayer I say no, but when have the people ever had a voice here or used that voice appropriately.

    • Kevin Ingham

      There are no “proceeds” of sale- if anyone is to take the bank on in it’s entirety they WANT money to do so !!!!!!

  • Barry White

    Another AKEL and Tof masterpiece. Mari without the loss of life, as yet.

  • Cydee

    Everything just unravels in the end-paragraph. A ‘vulnerable group’ of dodgy developers will go unscathed…

  • JS Gost

    So the governments involvement in this farce has cost €4,600,000,000 or €4,600 for every man women and child on the island. What would the cost of been to shut the bank down in 2013 ?

    • Kevin Ingham

      It is indeed astonishing incompetence.

      That Euro 4.6 billion is down the Swanee and there are still just as many billions of NPLs on the Co op balance sheet that will need to be written off in the future (in addition to the outright waste of Euro 4 billion to date)

      • This is not “incompetence” … this is a scam by the Cyprus government on behalf of Cypriot borrowers … taxpayers are being ripped off to pay the loans of Cypriots homebuyers and developers, who engaged in strategic defaults after parliament passed laws to guarantee that Cypriots could not be evicted nor their homes be repossessed. Hellenic bank are not so stupid that they don’t realise that, because their biggest shareholders are Ukrainians, the politicians will be out to rip them off too.

        • I hoped this new deal was combined with updated laws. Otherwise there is no chance of recovery.

  • clergham

    Before gouging the taxpayers yet again, bankruptcy and winding up proceedings should have been concluded against all NPL defaulters, and their assets seized

    Cowardly, populist politicians are the curse of this country

  • almostbroke

    Was ever any other conclusion , the taxpayer as always the one without the chair when the music stops !!!!!

    • There are plenty of ways you can hurt a man
      And bring him to the ground
      You can beat him, you can cheat him, you can treat him bad
      And leave him when he’s down, yeah
      But I’m ready, yes I’m ready for you
      I’m standing on my own two feet
      Out of the doorway the bullets rip
      Repeating the sound of the beat
      Oh yeah

      [Chorus]
      Another one bites the dust
      Another one bites the dust
      And another one gone, and another one gone
      Another one bites the dust, yeah
      Hey, I’m gonna get you, too
      Another one bites the dust

  • CyprusOilMan

    It’s a bank holiday weekend ….

    • I feel a great disturbance in the Force. As if millions of voices suddenly cried out in terror, and were suddenly silenced. I fear something terrible has happened.