Greek banks that are majority-owned by the country’s bank rescue fund HFSF will be allowed to issue new shares to boost their capital at market prices, according to a draft bill that also gives the rescue fund legal cover to see its stakes diluted.
The draft legislation obtained by Reuters is part of an omnibus bill on prior actions demanded by the country’s international lenders, the European Union and the International Monetary Fund, to release the next tranche of bailout loans.
The fund currently owns the majority of Greece’s four biggest lenders – National Bank, Alpha Bank, Piraeus Bank and Eurobank – after injecting 25 billion euros ($34.35 billion) last summer to recapitalise them in exchange for shares.
The draft bill stipulates that the rescue fund’s stakes in the banks can be diluted through equity offerings, with the HFSF waiving its rights to new shares issued by the banks.
Under the proposed legislation, the HFSF can give its green light to new share offerings by the banks at prices that are lower than those in previous recapitalisations.
The move opens the way for the planned capital increase by Greece’s third largest lender Eurobank, which needs to cover a 2.945 billion euro capital shortfall that the central bank’s stress test revealed this month.
Eurobank, 95 percent owned by the HFSF, was recapitalised by selling shares to the fund at 1.54 euros each. Its planned issue of new shares is expected to be priced much lower.
Under the draft law, the fund’s board can decide on the price of the share offerings based on a fair value evaluation by two independent financial advisers, taking into account prevailing market conditions.
The previous law on Greek banks’ recapitalisation did not clarify how the rescue fund would act regarding future capital boosts for the lenders.
Piraeus Bank on Wednesday became the second Greek lender to successfully complete a 1.75 billion euros share offering to bolster its equity capital and pay back preferred shares held by the state.
Peer Alpha Bank closed books on a 1.2 billion euro equity offering on Tuesday.
The draft legislation also sets «bail in» clauses for shareholders and subordinated debt holders to minimise state aid in line with EU directives.