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22ndannualcapital

Government contemplates bank privatizations

The possibility for an immediate return of three banks to the private sector is being examined by the government. A bill to be tendered on 20 January will make possible the privatization of Ethniki, Piraeus, and Alpha Bank.

The same bill foresees changes so that an increase in capital can proceed for Eurobank through international markets, for which several international players have expressed interest including funds controlled by George Soros, Apollo, Fairfax, and a consortium of funds comprising Marathon, York Capital, Pery, Monarch, and Anchorage.

The government aims to wean banks away from state funding so they may be supported by private shareholders, hopefully, improving liquidity on the Greek market, but also returning tens of billions of euros to state coffers. The bill will allow the Fiscal Stability Fund (FSF) to make a public bid to those holding FSF warrants, allowing warrant holders to replace them with shares held in banks by the fund. The lure will be in the form of a premium offered during the exchange. The exchange rate will come out of an assessment of each bank separately.

The rates of exchange being held today show an exchange of 8.3 shares for Ethniki bank, 4.4 shares for Piraeus bank, and 7.3 shares for Alpha bank, for free for each warrant. These rates will, more than likely, drop substantially. If all goes as planned the FSF will not receive money and will get rid of a small number of shares reserving the rest to be sold at a more opportune time, while, simultaneously taking the warrants out of circulation.

At the same time the Bank of Greece recognizes the whole of the tax postponed for systemic banks, meaning 100% from the current 20%, thus when any of these banks undergoes a troubled period, funding will continue through the ECB. This would constitute a safety net in the event that recapitalizaion of a bank is not approved by parliament.