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The conditions for Alpha Bank’s recapitalization are clear

04 April 2013 / 14:04:35  GRReporter
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Тhe final stage of the recapitalization of Alpha Bank is underway. On Saturday, 6 April, the general meeting of the bank will have to accept the plan to stabilize the financial institution.  Under this plan, the bank will try to raise 550 million euro from private investors, 457.1 million euro of which will be raised by the issue of new ordinary shares. Existing shareholders will be given priority in offering them but the process is expected to attract new investors as well. In addition, the bank will issue ordinary shares worth 92.9 million euro, which will be offered to strategic and institutional investors. Their involvement will contribute to the development of the bank in the future.

The Financial Stability Fund, which draws funds from the European Financial Stability Facility (EFSF), will also support the process by issuing new shares worth 4.1 million euro and the management board of the bank will determine their price. According to Alpha Bank, after the recapitalization, the bank’s capital base will be 7.9 billion euro, which is expected to make it the financial institution with the strongest capital base in the country as reported by To Vima.

Private investors will receive at no additional cost a warrant for each capital-increasing share purchased with cash. They entitle investors to acquire shares issued by the Greek Financial Stability Fund over the next four and a half years. The shares acquired by the Fund are part of the auxiliary funds granted by the state for additional funding of banks.

A warrant can include between seven and nine ordinary shares, depending on the degree of coverage in the capital increase. Their price will be determined in advance and will be equal to the established price of the newly issued shares during the recapitalization, plus an annual bonus, which will increase from 1% in the first year to 5% in the last year before the end of the period. The warrants themselves will be traded on the Athens Stock Exchange.

Alpha Bank will get away with nationalization if it is able to raise the necessary capital from the private sector and limit the voting shares held by the Greek Financial Stability Fund. If no quorum for deciding on any matter related to the recapitalization is reached during the first session of the general meeting this Saturday, an extraordinary general meeting will be scheduled for 11 April this year and possibly, a second extraordinary general meeting will take place five days later.

The situation with the merger of the National Bank of Greece (NGB) and Eurobank remains unclear. After the government and the owners of the two institutions have been working hard on the merger over the past few months, rumours have been spread that it might not happen. Greek media are launching the idea that the supervisors from the International Monetary Fund, the European Central Bank and the European Commission are opposing the merger. Unconfirmed information indicates that the lenders find the establishment of a new super-bank unsustainable. So far, the lenders have not confirmed these rumours. It is not excluded that the crisis in Cyprus may have scared the Greek government and that it may have changed its position as regards the consolidation of the banking sector.

Some experts estimated last year that the new NBG-Eurobank would create a banking mastodon, which would not be able to raise the necessary capital from its investors. In this situation, the nationalization of the new merged bank would be inevitable. If things develop this way, the state would have to undertake to rescue the bank, which would additionally burden Greece in financial terms and would pose serious problems to the recapitalization. NBG already owns 84.3% of Eurobank. The legal completion of the process and the final permits for its implementation are expected in the middle of the year.

Over the past three years, the Greek governments have adopted the practice of shifting the responsibility for difficult decisions to the foreign lenders. The country does not preclude that the change in the position as regards the merger of the two institutions may have been decided by the tripartite government rather than by the Troika.

In Cyprus, the state was unable to take on the burden of recapitalization of the two largest banks, which led to a series of negative effects - banks were closed for 12 days, economic activity was almost completely paralyzed and confidence in the euro as a currency was again shaken. One of the most common views in Greece today is that the local government fears a situation similar to that in Cyprus and that is why it is trying to avoid taking on a burden greater than the financial resources of the government. However, the merger of NBG-Eurobank cannot be pending for a long time.

This Thursday, the supervisors’ mission has returned to Athens to inspect the progress of reforms. The first meeting will be with Finance Minister Yiannis Stournaras and it is expected that the future of the banking system will be discussed in addition to other matters. After the inspection, the supervisory Troika will publish a report on the progress of the Greek reform, which is expected to shed light on the uncertain merger between NBG-Eurobank too.

Tags: EconomyCompaniesAlpha BankEurobankNBGGreeceCrisisMergersBanks
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