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Banks and funds renegotiate almost closed NPL deals

Due to the coronavirus, funds and servicers investing in the NPL portfolios of the Greek banks are now asking for the renegotiation of the terms, a step before the contract signing. Some also ask for smaller-scale adjustments to already signed contracts.

The coronavirus pandemic found the domestic banks amid an ambitious NPE reserve program through securitization and portfolio sales.

The tender procedures that were in early stages (Alpha Bank – securitisation of the Galaxy portfolio and the sale of 80% of Cepal) or in the planning process (NBG – the securitisation of the Frontier portfolio and Piraeus bank – the securitisation of the Phoenix portfolio) have been postponed or will be postponed as the intensity of the pandemic leaves no room for other options.

At the same time due to the pandemic the signing of agreements for mature procedures, such as project Neptune of Alpha Bank, project Icon of NBG and project Trinity of Piraeus Bank are is delayed.

Preferred investors have either already asked for a renegotiation of the price of their binding offers, or are reconsidering their stance, suspending negotiations to sign a purchase agreement. The funds seek either a reduction of the price by up to 30% or to pay part of it, provided that pre-agreed earn-out schemes are achieved. This way, they are asking the banks to take part of the risk .

The binding offers were submitted in a promising environment. The economy was recovering, even at a slower pace than in the previous recession, real estate prices with long-term or short-term leases rose sharply, and auctions were due to intensify.

Most of the above parameters have been cancelled due to the pandemic, or in the best case scenario, they are questionable. The funds say that one of the reasons why Standard & Poor’s has downgraded the prospects of domestic banks is the delay in the recovery of the real estate market, due to the pandemic and its restrictive measures.

Therefore, the funds estimate that the achievement of budgeted receipts will go back for at least 12 months, a development that reduces the expected return. Hence, one of the first steps of the renegotiation is to pay part of the price, if certain performance is achieved.

Original source: Euro2day

Adaptation/Summary: Kiki Athanasiadis

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