Bank of Cyprus confirms sale of €3b Project Helix to Apollo

Bank of Cyprus confirmed on Tuesday that it has inked the sale of a €2.8 bn non-performing loan portfolio to US group Apollo Global Management, as reported by PropertyEU earlier this week.

'This is the first meaningful corporate and SME NPL trade in Cyprus and a very meaningful trade in the context of the Bank and indeed the country,' commented Group CEO John Patrick Hourican.

PropertyEU reported on Monday that New York-based public equity group Apollo was to be announced as the winner of the Helix non-performing loan portfolio after the Bank of Cyprus, the island’s largest lender, had postponed the announcement of its first-half financial results to today.

Apollo is paying €1.4 bn for the package, or 48 cents on the dollar. According to well-informed market sources, the package includes a total of 14,000 loans secured by 9,065 properties and has a book value of roughly €1.5 bn. Under the deal, the portfolio will be transferred to a licensed Cypriot Credit Acquiring Company whose shares will then be acquired by certain funds affiliated with Apollo. Following a transitional period where servicing will be retained by the bank, Apollo will appoint a long-term servicer.

The deal, which is capital accretive to Bank of Cyprus, will be partly financed with debt including the provision of a €450 mln senior tranche from the vendor.

In a statement, Bank of Cyprus said that the transaction reduces its gross non performing exposure ratio by around 10 percentage points and represents a loss of €135 mln for the group, included in the group's second-quarter financial results.

Completion of the transaction remains subject to a number of conditions, including the ECB agreeing to a significant risk transfer benefit from the transaction.

Following the completion of Project Helix, Bank of Cyprus' gross NPEs will be 65% lower than its peak in 2014, right after the lender was forced – under the terms of a €10 bn bailout of the country – to seize cash from its savers.

Competitive process

Bank of Cyprus had been in contact with a number of investment funds for the past three months on the sale of Project Helix, which initially involved a much larger portfolio representing the bank's entire non-performing exposures with the exception of its bad consumer loans.

The size of the package - which had a nominal value of €7 bn - was seen as the main stumbling block in the sale process, particularly when compared to the island’s economy which had a gross domestic product of just over $21 bn last year.

Over the past few months, Bank of Cyprus had to reduce the size of the portfolio sale twice to less the half the initial value to be able to go forward with the transaction, which has been managed by Morgan Stanley.


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