Plans for private sector to cover Eurobank share increase in full

The plan for Eurobank’s share capital increase and the participation of private investors therein was the focus of talks between the Finance Ministry and the Hellenic Financial Stability Fund (HFSF) in Athens on Monday.

Sources said that the meeting affirmed the original plan for the increase to take place on market terms with an aim for its coverage by private investors, given that the bank’s return to the private sector constitutes one of the country’s obligations to its creditors.

The meeting discussed the need for a change to the legislative framework, the burning issue of the price of the increase, the results of the stress test that BlackRock is conducting on the lender, and issues linked to the quality of potential investors. Last week, Greece’s creditor representatives raised the issue of what kind of investors would be acceptable, but common ground was eventually found during the talks with the Finance Ministry, according to sources.

There are two crucial issues at stake, the first one being the new capital requirements that the stress test will reveal. Analysts estimate that these needs will amount to 2 billion euros, so any amount above the original expectations should make the process more difficult, but if less money is required, then the share capital increase will become easier.

The second sensitive issue concerns the terms of the capital increase, especially the price to be set for the sale of the new shares. Determining a price that will be attractive to private investors will be a challenge for the HFSF board as well as the government. HFSF officials noted that the increase should take place on market terms, but at the same time the price must safeguard the interests of the fund, and therefore taxpayers. Eurobank was recapitalized this year not on market terms but with the HFSF covering it fully.

The government’s objective is for private investors to cover the whole of the share capital increase, with the HFSF participating only in the part of the increase that will not be covered by the private sector. If private investors do cover the entire increase, the HFSF stake will fall from 95 percent today to 50 percent.

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