On Friday Piraeus Bank said it will proceed with a capital increase in cash via the offering of pre-emptive rights to existing shareholders, for approximately €800 million. This amount is subject to shareholders΄ approval at the EGMs.
The bank said it has received underwriting commitments subject to customary conditions, in respect of the full amount of the Rights Issue from Barclays Capital, Credit Suisse, Goldman Sachs International and Morgan Stanley, which will act as Joint Global Coordinators (“JGCs”) for the Rights Issue. The subscription price for the capital increase will be determined prior to the launch of the Rights Issue which is expected to be in January 2011.
“The proposed capital increase aims to:
-Strengthen the Bank΄s capital position in anticipation of a stricter regulatory environment and to fulfill higher investor expectations;
-Enhance the Bank΄s position in the context of the macro-economic conditions in Greece; and
-Allow the Bank to take advantage of attractive organic growth opportunities in the region.
A capital increase of €800 million would have resulted in pro-forma capital ratios of 9.5% Equity Tier 1 Capital and 10.8% Tier 1 Capital (+200 bps) as of 30 June 2010. As a result, the Total Capital Adequacy Ratio would have reached 11.6%.
The Bank has agreed to a 180 day customary lock-up provision following the date of completion of the Rights Issue.
In order to effect the Rights Issue, the Bank will call extraordinary meetings of the ordinary and preferred shareholders of the company (collectively, the “EGMs”), in order to resolve upon a capital increase by way of a Rights Issue, and a reduction of the par value of the ordinary shares of the Bank without increasing the number of shares outstanding.
Additionally the Bank also intends to seek shareholders΄ approval for the issuance of convertible bonds for up to €250 million with a waiver of pre-emption rights. This is to to further improve the financial flexibility of the Bank and to increase the ability to strengthen its capital base. The specific terms of any convertible bond offering will be set by the Board of Directors of the Bank prior to the launch of any such offering, which will also be subject to the above mentioned lock-up period.
The EGMs are expected to be convened at the first call on the 23rd of November 2010. Following approval by that or a subsequent repeat EGM, the Rights Issue is expected to be launched in January 2011. The specific terms of the Rights Issue will be set by the Board of Directors of the Bank prior to the its launch.
With respect to the Rights Issue, Chairman of the Bank Michalis Sallas stated: “This is an important step for Piraeus Bank, allowing us to further strengthen our capital base in the face of a challenging environment, and putting us in a position to benefit from an improvement in economic conditions.”
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