Bentley in Belgravia Shows Greece Is Good for Buyout CEOKiel Porter, Aaron Kirchfeld and Marcus Bensasson
Few financiers in London covet a job with a government-owned Greek bank. A glimpse of Pavlos Stellakis’s Bentley or his townhouse in Belgravia might have changed their minds.
For more than a decade, Stellakis has presided over a private-equity business for Greece’s oldest and largest lender. While the bank and the country’s economy spiraled toward collapse, he prospered. National Bank of Greece SA received its first state rescue in 2009, the same year Stellakis was awarded a $3.8 million bonus. Since 2010, he has earned at least 60 percent more annually in salary than the bank’s chief executive officer, according to company documents. The funds he oversees have underperformed most peers and delivered few profits, the documents show.
Greek taxpayers, who own 57 percent of Athens-based National Bank after its 8.5 billion-euro ($11.5 billion) bailout last year, have no say in Stellakis’s compensation, according to two people with knowledge of the matter. Instead of being determined by the bank, it’s set by a three-person committee at NBGI Private Equity Ltd. that includes Stellakis himself, according to the company’s website.
“At a time when people’s wages and pensions are being cut, for executives at banks that are being supported by public funds to be paid so much is wrong and it shouldn’t happen,” Louka Katseli, who was Greece’s economy minister when the nation received its first international bailout in 2010, said, speaking generally and not specifically about Stellakis.
Stellakis, who is chairman and CEO of NBGI, paid 8.4 million pounds ($14.2 million) in 2009 for a six-bedroom townhouse in London’s Belgravia district, a block from Buckingham Palace Gardens, according to a Land Registry filing. He also has properties in New York and the south of France, and has had luxury cars including a Bentley and two Porsches, say two people with knowledge of his affairs.
While the rescued Greek lender kept its buyout unit alive in London, JPMorgan Chase & Co., the largest U.S. bank, said last year it would spin off its private-equity unit, One Equity Partners LLC, as an independent firm. In 2011, Bank of America Corp. announced plans to separate its $5 billion Capital Partners buyout fund as it sought to preserve capital. That same year, Credit Agricole SA sold its buyout unit.
In January, after inquiries by Bloomberg News, National Bank commenced “Project Laurel,” renewing previously stalled efforts to sell its buyout unit, according to two people with knowledge of the matter and marketing documents seen by Bloomberg News that relate to the potential sale. Stellakis, 55, is seeking to retain a management role with any new owner, the documents show.
National Bank Deputy CEO Petros Christodoulou told analysts on a May 28 conference call the lender is “already in the process” of disposing of its U.K. private-equity unit. He spoke as the bank posted a 181 million-euro first-quarter profit, beating analyst estimates in a sign that Greek lenders are past the worst of the financial crisis.
National Bank shares have lost more than a quarter of their value this year after the country’s central bank rejected its plan to fill a 2.2 billion-euro capital shortfall without raising new shares by selling assets. The firm is the worst performer on the 43-company Bloomberg Europe Bank and Financial Services Index this year.
The bank, NBGI and Stellakis, through a spokesman, all declined to comment for this story. Efforts to speak with Stellakis at his office and his London home were unsuccessful.
Meanwhile, NBGI remains firmly under Stellakis’s control.
Stellakis has degrees in economics from Oxford University, where Giorgios Zanias, National Bank’s chairman, was among his lecturers in the mid-1980s. Stellakis previously worked at Hill Samuel, a London merchant bank.
In 1996, National Bank hired Stellakis to run NBG International Ltd., an investment-banking subsidiary. Most of its operations were brought under National Bank’s internal investment-banking division in a 2009 reorganization, leaving Stellakis with the buyout firm, which he runs from offices near London’s St. Paul’s Cathedral. Stellakis was a National Bank board member from 1999 to 2002.
Stellakis, balding with streaks of gray and heavy-set, has kept a low profile in London and Greece, rarely appearing in the press. He is usually seen in the office on Wednesdays, though he has been coming in more regularly since the sales process began, said the people, who asked not to be identified because they weren’t permitted to publicly discuss the matter.
Married and the father of three, Stellakis was described by associates as polite, aloof and fond of his cars and skiing. His daughter, Elysia-Elena Stellakis, says she was raised in a supportive environment.
“I have been fortunate to grow up in a family where I have been taught that women are equal to men and have the same opportunities as men; no debate, no struggle -- simply a fact,” she wrote as an 18-year-old last year in an article about the glass ceiling for women in business for the Telegraph newspaper.
Since 2000, NBGI has raised about 900 million euros, according to NBGI’s website, with almost all of that coming from the National Bank of Greece, a May 2014 filing with the U.S. Securities and Exchange Commission shows. NBGI has invested more than half of that, the SEC filing shows. The investments have been mainly in companies outside Greece valued from 5 million pounds to 50 million pounds, according to the NBGI website.
Stellakis focused on managing relations with investors, mainly National Bank, and didn’t personally find deals for the private-equity firm, said the people.
“It was a pretty successful fund, and Stellakis played a significant and positive role,” said Nicos Koulis, head of private equity at Eurobank Equities and a former member of NBGI’s southeastern Europe fund’s investment committee. “The fund was well managed with good procedures in place, in line with what should happen and what you’d find in a similar fund in America. Stellakis played a key role putting that in place.”
Stellakis’s first fund in 2000, NBG Private Equity Fund LP, amassed about 65 million pounds, the equivalent of about 100 million euros at the time, from National Bank, according to marketing documents. It returned more than two-and-a-half times the money the fund invested, according to the documents, making it more successful than the industry average.
NBGI hasn’t been able to replicate that early success. From 2001 to 2011, it raised 10 other funds that invested more than 500 million euros in everything from southeastern European firms to technology companies, according to marketing documents seen by Bloomberg News. Collectively, the 10 funds are projected to lose about 25 euros for every 100 euros invested, the documents show.
“A performance average of 0.75 times gross will be disappointing for investors, given their expectation is usually at least two-and-half times that figure,” said Mounir Guen, head of MVision Private Equity Advisers Ltd. in London, which helps firms raise money. “Private-equity performance among European lower-quartile managers is typically higher over the long term.”
Taking into account all 11 funds, NBGI still expects to break even, according to the documents.
NBGI’s investments started losing value with the global debt crisis as financing seized up and investments such as the U.K.’s Brownhills Motorhomes Ltd. failed in 2008, said three people with knowledge of the circumstances.
Even as NBGI’s performance deteriorated and National Bank’s finances collapsed, Stellakis kept making money and the buyout unit continued to collect millions of pounds in fees.
In 2009, the year the bank was first bailed out, he was awarded a 2.25 million-pound bonus, spread over three years, on top of his basic salary of 393,000 pounds, according to a U.K. Companies House filing. Last year, as Greece struggled with unemployment that reached 27.9 percent, Stellakis received 501,197 pounds ($850,330) in base salary, the filings show. That was more than double National Bank CEO Alexandros Tourkolias’s 267,134 euros ($361,859) in salary in 2013, according to its annual report.
Spokesmen for Stellakis, NBGI and National Bank of Greece declined to specify his total compensation, and the people with knowledge of his circumstances said they didn’t know the total. Private-equity executives typically earn far more from profits from deals than they collect in salary.
Stellakis’s pay is set by a three-member board made up of him, NBGI’s human-resources manager Isobel Hammond and non-executive director John Harry North, according to the company’s website. Hammond didn’t respond to telephone and e-mail requests for comment. North couldn’t be reached for comment through directory assistance or a visit to his home.
“It is typical that while a private-equity unit is part of a bank there will be at least one representative of the bank on the company’s board to help ensure good governance and appropriate oversight,” Jeremy Bell, a partner at law firm Ashurst LLP in London who has advised on private-equity spinoffs, said in a telephone interview.
Stellakis is entitled to the largest share of the firm’s carried interest, its share of gains from any investments, according to three people with knowledge of the matter. Private-equity firms’ founders typically take the biggest portion, with the remainder being divided among employees.
Based on performance disclosed in the marketing documents, NBGI would have received about 20 million pounds in carried interest from its first fund, and none since, according to calculations by Bloomberg News.
In one fund, NBGI Private Equity Fund II, Stellakis became the sole recipient of any future profits after it was restructured, four people said. That fund, NBGI Private Equity (Tranche II) LP, has invested 34 million pounds since being formed in August 2011, documents seen by Bloomberg News show.
The Hellenic Financial Stability Fund, established in 2010 to help oversee the bailout, said it has no say in salaries at overseas units of the banks it supervises.
“The benefits of executives at subsidiaries of the banks are not approved by banks’ board of directors, where the HFSF has representatives, but by the boards of the companies abroad, according to the circumstances of the country in which they’re operating,” the HFSF said in an e-mailed response to questions.
National Bank has again begun exploring an NBGI sale, after talks with a potential buyer foundered last year, according to two people with knowledge of the matter. Facing an impending health assessment by the European Central Bank, the 173-year-old Greek lender hired advisory firm Cogent Partners to find a buyer, according to NBGI’s 2013 annual report. A Cogent spokesman declined to comment.
Private-equity fund managers affiliated with Goldman Sachs Group Inc. and Deutsche Bank AG are among those who have submitted first-round offers, said two people with knowledge of the matter. Both bids valued the unit at about 300 million euros, they said. Spokesmen for Goldman Sachs and Deutsche Bank declined to comment.
In failed negotiations over a possible sale of NBGI last year, Boston-based Harbourvest Partners LLC valued National Bank’s stake at about one-third less than the bank had invested and 20 percent less than it was seeking, said two people with knowledge of the discussions. A Harbourvest spokesman declined to comment.
Now, new private-equity deals are on hold, the people said, and several senior employees have left, including Mark Owen, an NBGI founder, who retired in August. The London office is also being prepared for sublet, just months after a 50,000-pound renovation ordered up by Stellakis, the people said.