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Bank of Cyprus sells bad loan portfolio to PIMCO

Bank of Cyprus announced that it has reached agreement with PIMCO for the sale of portfolio Helix 2, a portfolio of NPEs with a gross book value of €545 m.

According to the Bank’s announcement, the “Helix 2 Portfolio B” portfolio had a contractual balance of €783 m and comprises 16,000 loans, mainly to Retail and SME clients, secured over 4,000 real estate collaterals.

The net book value of the assets under sale amounts to €244 m. The gross consideration amounts to 44% of the gross book value and 31% of the contractual balance payable in cash, of which 50% is payable at completion and the remaining 50% is deferred up to December 2025 without any conditions attached. The consideration can be increased through an earnout arrangement, depending on the performance of Portfolio B.

The transaction reduces the bank’s stock of NPEs by 22%. Overall, the pro forma NPE reduction for 2020 amounted to €2.1 bn reducing NPEs to €1.8 bn and the NPE ratio to 16%, including Helix 2 (Portfolios A and B) and an organic NPE reduction of €600 mn.

At completion, the transaction is expected to be broadly neutral to the Group’s capital ratios. Upon the payment of the deferred consideration and without taking account of any positive impact from the earnout, the Transaction is expected to have a 14 bps positive capital impact on the Group’s CET1 ratio. The loan credit losses on Portfolio B, expected to be recorded in 4Q2020, is estimated at €27 mn.

The completion of Helix 2 Portfolio B will be aligned with the completion of Helix 2 Portfolio A and is currently estimated to occur early in the second half of 2021.

Original Source: Philenews.com

Adaptation/Summary: Kiki Athanasiadis