ATE capital increase defended

The increase of the share capital of ATE Bank (formerly the Agricultural Bank of Greece) was necessary as the bank was delivered by the previous administration with negative capital, which explains the rather low price of 2 euros per share used for the increase, Deputy Finance Minister Petros Doukas said on Tuesday. The increase was conducted on May 27 this year, with the state participating through its 84.5 percent stake. For every nine old shares, 20 new ones were issued. Doukas added that the decision by Swiss bank UBS to sell the ATE shares it had bought was legal although the bank itself was the bookrunner. This is so because UBS bought the undisposed shares on their issuing and could then resell whenever it wanted as these shares do not fall under the bookrunning regulations. Furthermore, the overall procedure of the capital increase and the role of the bookrunner regarding undisposed shares was included in the Information Sheet and was published in the Daily Price Bulletin of the Athens Stock Exchange, in accordance with recommendations by the Bank of Greece and the Capital Market Commission. Regarding UBS’s role as a bookrunner in the ATE share capital increase and the compatibility with the existing legislation, Doukas argued that UBS had been selected by an ATE committee from a short list of three international investment corporations. Alpha Finance was appointed as the issue consultant. In the context of the bank’s share capital increase, old shareholders were given the ability to register in advance for an additional number of shares, while if, despite the above, there were any undisposed shares, the non-stakeholding staff of the bank were also given the opportunity to purchase shares after submitting a special application. If, after all that, there were still some undisposed shares, then UBS had the obligation to buy them at the same price (2 euros per share), according to the bookrunning contract it had signed with the bank, so that the risk of partial coverage of demand was avoided and that there were no worries created among investors about the coverage of the whole amount and about the non-bolstering of the bank’s capital adequacy indices. The state did not wish to acquire the undisposed shares because it did not want to increase its stake in ATE, which would have reduced the bank’s free float below 15.5 percent, where it stands today (which is actually only 11-12 percent, as 3.8 percent corresponds to shares owned by the bank itself, its social security fund and the staff pension’s fund), and in order to avoid the risk of the European Commission considering the increase of the state’s stake as a government subsidy to the bank. In this context, UBS purchased 18,387,322 undisposed shares, paying about 36.8 million euros in cash. It could then resell them at a time it considers appropriate, given that the Bookrunning Regulation includes no obligation of maintaining these shares for any specific period. Consequently, according to Doukas, UBS has acted within the context of the regulatory framework for the disposal of shares to the investing public, which means there is no breach of the Bookrunning Regulation, which was also the conclusion of the Capital Market Commission. The latter’s decision is included in a letter submitted by the Finance Ministry to the Parliament’s Financial Affairs Committee. Answering criticism that the 2-euros-per-share price was low, Doukas countered that the previous government had delivered ATE with negative capital and with losses exceeding 4 billion euros. Finally, regarding the state’s purchase of 6 million ATE shares on December 31, 2004, Doukas argued that the government was forced to buy shares which the bank had acquired through decisions made by the previous administration. According to law, after three years these shares must be either sold or canceled. To avoid a negative effect on the already burdened own capital of the bank, the state purchased almost half of the shares with an equal amount of Treasury bonds. This transaction has been beneficial both for ATE, which has avoided the cancellation of its own capital, and for the state, which has bought a total of 527,597,444 new shares, paying 1.05 billion euros, while the current stock market price (yesterday ATE stock closed at 5.12 euros) of those shares exceeds 2.7 billion, a rise of 157 percent.