Eurobank gets green light for €2.9bn issue

A customer uses an automated teller machine outside a branch of Eurobank in Athens. Eurobank will be the third Greek lender after Alpha Bank and Piraeus to tap capital markets this year.

Reuters/Athens

Greece’s third-largest lender Eurobank got approval from the country’s bank rescue fund, its main shareholder, for a €2.86bn ($3.97bn) share offering to plug a capital shortfall.

Eurobank expects the share offering to be completed by May, its board told shareholders on Saturday.

Eurobank will be the third Greek lender after Alpha Bank and Piraeus to tap capital markets to bolster its equity this year, as signs that Greece is starting to recover from its severe debt crisis are luring foreign investors back to battered Greek assets.

Athens returned to the bond market on Thursday after a four-year exile, raising 3.0bn euros with a five-year bond that was snapped up by foreign investors.

 Alpha Bank and Piraeus raised a combined €2.95bn last month.

Eurobank, with a market value of €2.47bn and 95% owned by the HFSF bank rescue fund, will proceed with a combined offering of new shares to international and domestic investors.

Current shareholders, including the HFSF, will waive their rights to the share issue, meaning the rescue fund’s current stake will be significantly diluted.

“Eurobank will take the big step to return to private ownership,” the bank’s CEO Christos Megalou told a shareholders’ meeting. “The capital increase will shield the bank with a capital adequacy that can meet the challenges of the future.”

Eurobank’s capital shortfall was revealed in a health check last month by the Greek central bank to see whether last year’s 28bn-euro recapitalisation of the top four banks had left them with enough cash to withstand rising loan losses. It showed that Eurobank needed an extra €2.95bn.

Barclays, Deutsche Bank and JP Morgan will lead the book-building to international investors and about 10% of the new shares will be offered to domestic investors, Megalou said.

The board of the Hellenic Financial Stability (HFSF) rescue fund, which pumped €5.84bn at €1.54 a share to recapitalise Eurobank last year and became its majority owner, will convene today to set a floor price for the new shares.

The price cannot be lower than 0.30 euros, the par value of the bank’s existing shares, Eurobank’s board said. The HFSF may set the bar a bit higher.

The rescue fund has hired Lazard and Morgan Stanley as advisers to assess a fair value for Eurobank.

Its board will evaluate bids from so-called anchor investors, who must bid for at least 1.2bn to €1.5bn worth of the offering, and make its choice tomorrow, a senior HFSF executive told Reuters.

“A price range for the offering will be announced before books open, most likely in the next 10 days,” the HFSF executive said, declining to be named.