Eurobank to sell Turkish subsidiary [update]

Eurobank, the third-biggest Greek bank, said on Monday it had agreed to sell its Turkish subsidiary Eurobank Tekfen to Kuwait’s Burgan Bank for 272.7 million euros ($359 million) to shore up reserves hit by a debt swap.

“Under the terms of the transaction, Burgan will acquire 99.3 percent of Eurobank Tekfen, from Eurobank EFG and the Tekfen Group, for an upfront cash consideration of 641 million Turkish lira,» Eurobank said in a statement.

It added that the deal, scheduled to be completed in the third quarter of 2012, would increase the Greek group’s core tier I capital by almost 300 million euros and improve its liquidity position by 800 million.

Greek banks have been trying to bolster their shareholder funds after the government effected a bond swap in March which cancelled nearly a third of its huge debt.

Out of 107 billion euros of debt due for cancellation, about 45 billion euros’ worth was in the hands of banks in Greece.

A process to recapitalize Greek banks is to begin later this month.

The debt swap also brought down a planned merger between Eurobank and number two Greek lender Alpha Bank set up last summer to create Greece’s largest bank.

Alpha Bank said in March that it wanted to scrap the deal and has summoned its shareholders to an extraordinary general meeting on the issue on April 26.

It had argued at the time that the debt swap was expected to affect it and Eurobank in a «disproportionate» manner.

Eurobank insisted last week that the benefits of the merger, which would help Greek efforts to shake off a five-year recession, outweighed the negative effects of the debt cut. [AFP]