The bill will be submitted to the Greek parliament this week.
The four systemic banks are expected to transfer 31.5 billion NPLs to Hercules APS by mid-2021, starting early 2020. Alpha bank will transfer €12 billion, Eurobank €7.5 billion, Piraeus Bank €6 billion and NBG €6 billion.
The securitization, which exceeds the ambitious initial target of €30 billion, also raises the amount of government guarantees. Government guarantees to accompany senior securitization bonds increased from 9 to 12 billion euros, while the amount initially discussed was €5 billion. The increase of government guarantees is indicative of the growing interest of banks to participate in the APS.
How will Hercules work
Implementing the Hercules plan will help the Greek banking system get rid of bad loans of around €30 billion, thereby allow banks to consolidate their assets, gain credibility and liquidity and focus on financing businesses and households and to stimulate growth.
“Hercules” is based on the Italian GACs model of government guarantees, but is different, as it has resolved the issue of lack of investment grade of Greek bonds.
Following their participation in “Hercules”, banks will be able to access bond markets and raise capital required to adapt them to pan-European MREL provisions by 2025.
“Hercules” will be the first step in rehabilitating the Greek banks by getting rid of the “bad” loans. Rating firms see Hercules as a credit positive for Greek banks, as it will help them accelerate the reduction of large volumes of NPLs that burden their funds and lending capacity.
This will not be easy as it will have to bring the Greek NPL rate in line with the European average. The Greek banks’ NPLs are more than 39.2% higher than the EU average (3%) and the ECB’s directly supervised credit institutions (3.6%).
Crucial to the success of Hercules will be the operation of the servicers . The successful operation of the servicers will ensure that the SPV is paid for by the flows generated, in order for the SPV to pay the commissions to the State and to ensure that no state guarantees are forfeited.
How will banks enter Hercules
Eurobank will enter first the Greek APS using state guarantees of €2.5 billion. The bank is ready to securitize the Cairo mixed portfolio of €7.4 billion. The sale of Cairo, as well as its subsidiary servicer FPS, were awaiting the finalization of “Hercules”. With the bill passed, the deal with doValue will close immediately.
Alpha Bank is expected to enter Herculer in the first half of 2020, with the €12 billion securitization of Galaxy project. The bank will also direct to Hercules its Orion portfolio, €1.9 billion mortgage NPLs.
Piraeus Bank prepares for Hercules a €2 billion mortgage NPL portfolio (project Proenix). Within 2020 the bank will also run two securitizations of secured business NPLs portfolios. Within 2020 the bank will proceed with two securitizations of secured corporate NPL portfolios.
The National Bank of Greece plans to direct €6 billion portfolios to Hercules within 2020.
Original Source: Capital
Translation/Adaptation: Kiki Athanasiadis