The Single Supervisory Mechanism (SSM) of the European Central Bank has rejected Piraeus Bank’s demand to cash in its contingent convertible bonds (CoCos) coupon, worth 165 million euros, on December 2.
Kathimerini understands that the SSM board convened on Thursday on the issue and its negative response will be announced to the Greek lender on Friday; Piraeus will have five days to submit its comments.
The decision is based on the SSM directive to European banks against the distribution of dividends due to the pandemic. Especially as far as Piraeus is concerned, the SSM has taken into account that the payout of the €165 million would have a negative effect on the Greek lender’s capital adequacy amid the pandemic which is also forcing Piraeus to make additional provisions.
Although the SSM response will not be made public before its ratification by the ECB board, expected on November 25, the ban on cashing in the coupon effectively validates the idea of turning the CoCos worth €2 billion that the state possesses through the Hellenic Financial Stability Fund (HFSF) into shares.
In a bourse filing on Thursday, Piraeus noted that “in the context of the examination of the demand submitted, regarding the payment of the annual interest of the CoCos in cash, [the bank] is in constant contact and cooperation with the competent agencies at the SSM, providing the documents, comments and clarifications the regulator requires.”
The conversion of the CoCos into shares will take place within December, straight after the deadline for the coupon payment. After the conversion, the HFSF will increase its stake in Piraeus from 26.4% today to 61.3%. At the same time, the participation of private stakeholders will be almost halved – i.e. that of John Paulson, Aristotelis Mistakidis and the Bienville Capital fund.
This practically constitutes a nationalization for the bank, which forms part of a broader plan agreed with the monitoring authorities for the streamlining of Piraeus and then its privatization through a share capital increase. Piraeus will also securitize nonperforming loans worth €13 billion and reduce its staff and branch numbers.