Latest Eurobank developments:

The control of Eurobank, Greece’s third largest bank, is to pass to a Fairfax-led investment group which includes Capital, Fidelity and other international investors. The investors will hold 47% of the banks shares, paying 0.30 euros per share (25% below its current market price) investing a total of 1.3 billion euros. The purchase of the shares is expected to anchor the planned share capital increase of 2.86 billion euros.  

According to a statement issued  on Tuesday by the Hellenic Financial Stability Fund (HFSF) which holds 98% of the shares in the bank (following its bailout using money from large public loans) and which is prohibited for taking part in the share capital increase, the Fund ‘approved today the offer submitted by a Group of Institutional Investors (Investors) regarding Eurobank’s share capital increase. The Investors include Fairfax, Capital Research and Management, Wilbur Ross, Fidelity, Mackenzie, and Brookfield.

Below is the article by Steafons Manos translated by TPPi and reprinted with the author's permission (the original article in Greek can be found here):

According to the most recent data the P/B (the market price to book value ratio) for the four major Greek banks was:

  • Ethniki: 1.282
  • Apha: 1.272
  • Piraeus: 1.081
  • Eurobank: 0.7736

The goal of  the government and the Hellenic Financial Stability Fund is to increase the share capital of Eurobank by 3 billion euros. To make the increase more attractive, the government legislated that the new shares can be offered at a price lower than their purchase price, e.g. for a price that corresponds to a P/B of 0.500. The HFSF itself which holds the overwhelming majority of the shares of Eurobank (98%) according to the government legislation is prohibited from participating in the capital increase.

Under these conditions I am certain that the increase will be successful. The HFSF will no longer be an important shareholder of Eurobank and will be unable to recoup the capital which it initially invested in the bank. The losses that will be sustained will burden taxpayers.

What should the investor expect who will invest 3 billion euros for the majority of Eurobank shares?

He will have obtained the majority stake with a P/B of 0.5000 and the bank with the fresh 3 billion will be more than capitalized. The investor will therefore expect (rightly I believe) that in a short timeframe of a few months the P/B of the shares will reach the levels of the other banks. That is somewhere between 1.000 and 1.300 or more. In a few months the 3 billion will have become 6, 7 plus billion.

With the approval of parliament, the blessing of the Finance Ministry and the HFSF, a system will have been created guaranteeing certain and dizzying profits. A system that is only open to a select few. It is exceptionally difficult for me to believe that the leadership of the HFSF does not accept the above line of reasoning. But why then is it moving ahead with such a measure?

What should happen? The capital increase should be undertaken solely by the HFSF. It has the money and it will reap the profits that I described.

I have ceased hoping that Greek society has the reflexes to put a stop to such phenomena of dizzying enrichment and because of that I have stopped writing. But at least let this article exist simply as a prediction of what will happen with the planned share capital increase of Eurobank. For all those who will say, “I didn’t know”.

I hope the media will dedicate a bit of its precious time to describing the terms of the sale of the OPAP [the lottery monopoly] shares, the assessments of the well-paid evaluators (and for Eurobank the evaluators will assure us that everything is as it should be) and what is the final price of the shares a few months down the line. For Greeks to know how money is made in crisis stricken Greece.