A final agreement with Intrum and Serengeti Asset Management for the securitization of Sunrise 1 was signed by Piraeus Bank, through which non-performing exposures amounting to 7.2 billion euros are achieved.
This is the first transaction of its strategic plan codenamed Sunrise, which aims to consolidate its balance sheet while improving the group’s profitability.
With Sunrise 1, the group’s red balance sheet loans fall below € 9 billion, accounting for approximately 23% of its total portfolio.
With the completion of Sunrise 2 amounting to 5 billion euros, the NPEs will fall to 4 billion euros and the index to 13%, while together with organic movements it will decline to a single digit percentage in the first half of 2022.
It is recalled that the transaction is part of the broader strategic plan of Piraeus Sunrise, which was announced on March 16, 2021 and highlights the rapid progress made by Piraeus in the implementation of the plan to reduce NPE by about 19 billion euros, to achieve a single-digit NPE index in less than 12 months.
The transaction
Based on the agreement signed by Piraeus Bank with Intrum and Serengeti Asset Management, 49% of the intermediate and low repayment priority bonds (mezzanine) and 2% of the junior notes of the securitization will be transferred.
The Sunrise I portfolio includes non-performing loans of individuals and companies and consists of approximately 205 thousand loans with a total gross book value of 7.2 billion euros, with data of 30.09.2020.
The valuation of the Transaction, which is based on the nominal value of the high priority bonds and the sale price of the intermediate and low priority bonds, corresponds to approximately 34% of the total gross book value of the portfolio.
That is, the 2.45 euros are covered by guarantees of the “Hercules” scheme and are considered recoverable with a very high probability. Piraeus Bank has already submitted a relevant application to the Ministry of Finance.
The transaction will be classified as held for sale in the 2nd quarter of 2021. Including NPE Vega and Phoenix transactions, which are expected to be completed this quarter, Piraeus’ non-performing exposure ratio will drop sharply to 23% from 46% in March 2021.
Subject to obtaining the required approvals, loans located within the periphery of Sunrise I securitization are expected to be delisted from the consolidated financial position of Piraeus Financial Holdings within the 2nd half of 2021.
The expected capital impact of the transaction is approximately 2.7 percentage points on the total capital adequacy ratio in December 2020, including the impact on the result and the easing of risk-weighted assets.
Distribution to shareholders
Piraeus Bank will hold five percent (5%) of Sunrise I intermediate and low repayment priority bonds, in accordance with the securitization supervisory framework.
Subject to obtaining the required corporate and regulatory approvals, Piraeus Financial Holdings is considering distributing to its shareholders part or all of the remaining percentage of these bonds.
In addition, Piraeus Bank will retain one hundred percent (100%) of high repayment bonds.
The Transaction is subject to all necessary corporate and regulatory approvals, as well as the consent of the Financial Stability Fund.
UBS Europe SE and Alantra CPAI Limited act as organizers and financial advisors of Piraeus in the Transaction. The law firms Paul Hastings (Europe) LLP and Moratis-Passas act as legal advisors of Piraeus in the Transaction. Orrick, Herrington & Sutcliffe LLP act as legal advisor to the organizers.
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