articles | 10 January 2016

Banks and large debtors set NPL restructure framework

Banks and large debtors have set the framework that will determine the extent that loans will not be fully served and the assets that companies will lose.

In other words non-performing loans are getting restructured. Bank of Cyprus (BoC) tweeted recently that it has met its target for one billion for restructuring of top non-performing loans by the end of the year, signalling a return to business as normal.

“It’s been almost three years since the deposit haircut. Now it’s time for loans and companies to reduce their size to match 2016 realities,” a banking expert told the press.

The main approach behind loan restructuring of the loan portfolio of large debtors was to give incentives for them to repay a part of the loan in an exchange for keeping the part that earns money for them.

As a bonus, companies will get time to either turn the money-losing part into a profitable one or sell it at the best possibly price.

If they fail to meet the targets set, restructuring plan makes it easy for banks to step in and take control.

“Experience says that we will see more assets deleveraging from important business groups in 2016,” the source said.

Already Shacolas Group, one of the biggest debtors of BoC, sold some of its big assets like the Mall of Cyprus and the Mall of Engomi to the South-African Attenbury for €193.7mn in 2015 and a 50% stake of Hermes airport shops to CTC-ARI for €55.7mn in 2014.

The restructuring list includes big names like the Leptos Group, Zavos Group, Pafilia Property Developers and Tsokkos Hotels and Resorts. Louis Group’s restructuring plan includes that DVB Bank can participate with a 49% stake in the company, according to an unofficial report in December 2015.

Loan restructuring with other big groups will follow shortly.

BoC is expected to clinch a deal with Frangoudes & Stephanou Group and Aristo Developer Group in 2016.

“It’s not just about money. Behind most of these groups are proud people who do not want to be remembered as defaulters that bankrupted their companies.

“These people are part of the business elite of Cyprus,” a banker that was involved in the restructuring deals told the press.

Source: InCyprus

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