Eurobank is expected next week to receive a credit rating for its Cairo project, which involves the securitization of 7.4 billion euros of bad loans, making it the first Greek lender that will apply for the Hercules Asset Protection Scheme.
Eurobank officials have met with Greece's Public Debt Management Agency, on the technical details so that the bank can apply for the asset protection program straight after receiving the credit rating. The application will relate to the securitizations of loans worth 2.4 billion euros, the senior notes belonging to the tranche, that will be rated by the credit agency.
Based on a decision from the European Commission's competition regulators and Greek law, the state can only back senior notes that must have a minimum BB- credit rating from S&P, or equivalent ratings from other agencies. This is the same credit rating as the Hellenic Republic.
Locking in such a high ranking for securitized bad loans, which sits at the same level as Greece's government bonds, is no easy task for Greek banks. This is why the asset protection plans offer state guarantees on bonds that relate to loans delayed up to 90 days, as a means of keeping the ranking high. In Italy, where a similar scheme was implemented, bad loans more than 90 days in arrears were securitized.
Eurobank has managed to be the first Greek bank to complete this difficult exercise, due to solid preparations. The recent steps in this long process are the calling of a general assembly for shareholders (January 31) where they will be called on to approve the hiving down of the banking activity and its transfer to a new company, as part of the agreement with doValue. Additionally, the board of Eurobank has secured with its workers' mutually acceptable terms for the transfer of 500 employees to FPS.
Via the deal with doValue, Eurobank is looking ahead after a long and painful period where banks were tested with large bad loan amounts. The agreement opens up the path to speedy reduction of non-performing loans, to reduce them to below 15 percent and create the largest loan servicing company n Greece.