HFSF: Together with TMEDE – Ellington at Attica Bank

By Leonidas Stergiou

The Financial Stability Fund (FSF) has successfully completed its exclusive negotiations with private investors TMEDE and Ellington Solutions SA, who have agreed to participate in the planned share capital increase of Attica Bank together with the HFSF. The cooperation with the private investors aims at the joint development of Attica Bank on the basis of a new business plan capable of creating value for the investment of the Fund.

Ensuring the development of the banking system is one of the main priorities of the Fund, which will be implemented in the case of Attica Bank, proving the full and substantial commitment of the HFSF in its mission.

The Fund’s Financial Advisors were Akinn Group, Houlihan Lokey and PricewaterhouseCoopers Business Solutions SA and as legal advisors it had the law firms Clifford Chance LLP and Koutalidis Law Firm.

This was the announcement of the Fund that was made public a while ago, ie a few hours before the completion of the increase of the share capital of Attica Bank by 240 million euros. Tomorrow, Wednesday, is the last day of trading the pre-emptive rights for AMK.

It follows from this development that the goal of increasing the share capital of Attica Bank will be achieved. However, the details that will judge the privatization of the Bank do not appear. A key issue in the negotiations between the two sides, according to sources familiar with the developments, was the need for more funds and which side would participate and how much. Part of the biggest need for capital would come from the cost of red loan securitizations.

Therefore, the agreement reached by HFSF and TMEDE-Ellington means that they either move forward, with an immediate reduction of the HFSF percentage (currently 68%) to result in a private investor (TMEDE-Ellington) with a majority (currently 14%). Either, as the second scenario envisages, the HFSF-Ellington scheme will enter with a lower percentage (22% -30%), in the first phase, in order to assess Attica Bank and any new capital needs in the second year, ie within of the first half of 2022 to proceed to a new capital increase. In this second phase, the private investor will emerge with a majority percentage.

Also, apart from the scenarios and the negotiations of the two sides, the interest is now turned to the supervisory authorities, ie Bank of Greece and SSM who wanted the immediate privatization, with one move, and in fact to be completed by the end of September 2021.

From the current distribution of shares, ie HFSF 68%, TMEDE 14% and EFKA 10%, and given that all major shareholders will take part in the capital increase at least up to their percentage, a possible scenario shows the consortium acquiring a share between 22 % and 33%. This practically means that the EFKA remains in its percentage and the HFSF is limited accordingly. Also, an important factor is the attitude of micro-investors, ie shareholders with a percentage of less than 5%. Under the terms of the AMK they can take part up to their percentage, but due to the capital changes that have taken place (with the rights of the deferred tax, the creation of a reserve and the issuance of new shares and rights for the AMK with a ratio of about 1 new to 49 old shares), have suffered significant losses. Hypothetically, if no small shareholder participates in the AMK, then the HFSF percentage will rise above 73%, which is not desirable.

Therefore, investment circles estimate that the most probable scenario envisages the participation of the private sector with more than 60 million euros in this phase, raising the percentage of the private investor between 20-30%. Then and most likely within the first half of 2022 there will be a new capital increase, between 100-170 million euros, where the private sector will become the main shareholder with the highest percentage.

In terms of timing, this is as follows:

08.12.2021: Last day of exercising the pre-emptive rights

10.12.2021 Distribution and disposal of any unallocated New Shares – Certification of payment of the Share Capital Increase – Announcement to cover the Share Capital Increase

13.12.2021: Approval of the ATHEX for the listing of the New Shares – Announcement for the start date of the trading of the New Shares

14.12.2021 Commencement of trading of New Shares