Piraeus Bank is launching the process for its first bad-loan portfolio securitization, opening the virtual data rooms to candidate investors in the Phoenix package within March.
Phoenix contains mortgage loans adding up to 2 billion euros and according to the bank’s plan this will be the first securitization to enter the state’s Hercules asset protection scheme in the context of a broader securitizations program adding up to 7 billion euros.
The non-binding offers for the Phoenix portfolio are expected next month. Based on the plan, the senior notes to be issued in the context of the securitization – for which the lender will demand state guarantees via Hercules – will come to 900 million euros. Besides the senior section of the bonds to be issued, which Piraeus will keep on its books, it will also hold onto 5 percent of the junior notes, offering 95 percent to candidate buyers.
Piraeus has already commissioned the assessment of the portfolio to an independent firm (DBRS Morningstar), while the start of procedures for the securitization of a second package of nonperforming loans, under the name Vega, will be run in parallel. This will include mortgage and corporate loans adding up to 5 billion euros.
The plan that was announced by the bank’s chief executive officer, Christos Megalou, foresees that the bad loans pile will be reduced from 24 billion euros in end-2019 to 13 billion euros in end-2020 and below 8 billion by the end of 2022.
Its bad-loan index will drop from 49 percent in end-2019 to 29 percent in December 2020 and 8 percent in end-2022.
In absolute figures the two securitizations will cost Piraeus just over 1 billion euros. In order to avert the increase in the state’s holding, which currently amounts to 26 percent of Piraeus’ share capital, the lender will follow the model of the separation of banking activity and the creation of a holding company.
The latter will be listed on the stock market and incorporate 100 percent of the banks’ shares, as well as the mezzanine and the junior notes.
Based on the business plan, the rest of the losses will be covered by the profits to be released from the reduction of provisions and the increase in operating profits.