Piraeus Bank announced on Thursday the transfer of a portfolio of serviced and nonperforming loans and stocks worth 1.2 billion euros to US fund KKR, one of the biggest in the world specializing in the management and streamlining of companies.
Besides the administration and redemption of companies, the agreement provides for KKR to channel funds of up to 300 million euros toward the smooth operation of the borrower firms. This will provide a solution to the major problem of recapitalizing companies that are considered sustainable but may find it hard to gain access to funding.
Piraeus will transfer those assets through securitization and the companies will be put under the administration and control of KKR Credit, while Piraeus will retain the banking services in the transferred portfolio. Sources say that the portfolio to be transferred concerns a wide range of sectors, including healthcare and food.
Senior Piraeus officials said that the deal secured will offer multiple benefits to the Greek group. First of all, it will clear up its financial report as a major part of the transferred portfolio concerns bad loans, which, upon the deal’s completion, will cease burdening the bank’s financial figures. At the end of September the group’s NPLs had grown to 39 percent.
Another benefit will be a solution to the thorny issue of the administration of problematic enterprises. Piraeus has bad loans and holdings in a great number of enterprises, which have either directly or indirectly come under the lender’s control. The day-to-day management and ensuing streamlining of so many companies exceeds the capacity of any credit institution. KKR has vast experience and success in this field and will act much more efficiently, thus achieving faster and better results.
Crucially, the deal will resolve the capital problem. The resurrection and streamlining of problematic enterprises requires not only efficient management but also capital injections. The agreement provides for KKR to invest up to 300 million euros to that end. Finding additional capital is usually the greatest obstacle when it comes to company restructurings.
Piraeus Bank chief executive Anthimos Thomopoulos stated that the deal with KKR “offers a taste of the new and dynamic approach to the management of the bank’s loans and holdings. Being the biggest Greek lender we are examining a broad range of tools in order to optimize and maximize the recovery of capital from those positions.” He added that “KKR’s intention to invest additional funds regarding the transferred portfolio constitutes a vote of confidence in the long-term prospects of the Greek economy.”