- Lenders seek to sell new shares following ECB stress test
- Minimum subscription price would wipe out existing stock value
National Bank of Greece SA and Piraeus Bank SA are drawing orders from investors at the lowest price at which they’re allowed to sell shares, according to people familiar with the capital increases.
Pricing at that level could mean discounts of more than 90 percent compared with the stocks’ market prices, said the people, who asked not to be named because order-taking continues and bids may still come in at higher prices.
Alpha Bank AE, which is also selling stock, has received orders for all the shares that are on sale, said Chief Financial Officer Vassilios Psaltis. Eurobank Ergasias SA, National Bank and Piraeus have yet to cover the share sales, two people said.
In a year that has been fraught with political uncertainty, forced bank holidays and a market shutdown amid a government standoff with creditors, the lenders are asking investors for new capital for the second time in less than 20 months. The people said that investors so far are reluctant to place orders and the success of the exercise will depend on whether the country’s government strikes a deal with creditors this week, which will restore the normal flow of public funds to backstop the recapitalization process.
“The market is placing a lot of emphasis on whether the Greek government can reach an agreement with Europe to clear the way for more funds,” said George Athanasakis, equity sales director at Pantelakis Securities SA in Athens. “That doesn’t make for a very optimistic mood in which to seek new investors. Share prices have come down a lot, which points to a big dilution for existing shareholders.”
Greek banks, which plan to shore up their capital before the end of the year, are heading for their biggest annual decline since at least 1996, according to data compiled by Bloomberg. The country’s benchmark ASE Index has tumbled 22 percent in 2015, one of the worst performing in the world.
The country’s four largest banks are selling stock to fill part of a 14.4 billion-euro ($15.4 billion) hole in their accounts identified by the European Central Bank. The state-owned Hellenic Financial Stability Fund will contribute the rest, with loans from Greece’s latest bailout, but not before the government agrees with creditors on a set of so-called milestones attached to its aid agreement.
If banks are unable to raise funds from money managers, they may be resolved, leading to their nationalization.
Piraeus may sell new shares at the minimum regulatory price of 30 euro cents apiece, two of the people said. According to the bank’s Nov. 9 presentation, that will follow a reverse stock split that will bundle existing shares. At 30 cents, the price would be about 93 percent lower than the market price.
Similarly, National Bank of Greece has announced plans for a 15-for-1 reverse stock split. A price set at 30 cents, the lowest price it can sell stock for, would imply a 95 percent discount.
Eurobank and Alpha Bank, the two smaller of Greece’s systemic lenders are also trying to cover the capital gap with measures including a debt-for-equity swap offer to bondholders. Eurobank has demand from investors for 75 percent of its total capital gap, according to a deal update sent to investors earlier Monday.
Stock investors can see their holdings almost wiped out as companies reorganize. Platinum miner Lonmin Plc is selling billions of new shares at a 94 percent discount, after warning investors that it might shut down if they didn’t approve the stock sale. Spanish gambling company Codere SA’s restructuring deal last year included an asset swap where bondholders ended up owning 97.8 percent of the company’s total equity.
Talks between the Greek government and representatives of the European Commission, the ECB and the International Monetary Fund during the weekend failed to reach a successful conclusion and are set to continue through Tuesday. The negotiations have progressed though, and euro-area officials may be able to decide on releasing aid payments to Greece as soon as Friday, according to two separate officials.
National Bank of Greece is seeking to raise 1.46 billion euros by selling stock and through a debt swap offer, according to a bourse filing late Monday. The remaining shortfall, totaling about 3 billion euros, will be covered with public funds from the HFSF, following a bail-in of existing stakeholders including the Greek state itself, which holds preference shares in the country’s biggest bank.