The big decision regarding Piraeus Bank's CoCos is expected in coming days as the ECB' Single Supervisory Mechanism (SSM) will inform the Greek lender whether it will allow the repayment of the annual bond coupon, in an unlikely scenario, or whether it opposes such a move, triggering their conversion into shares.
Banking sources and the investment community are taking the conversion of CoCos into shares as a given, while in a meeting held last week by Prime Minister, Kyriakos Mitsotakis and Bank of Greece governor Yiannis Stournara, the basic guidelines for the bank's future were decided in the event that the state takes control of the lender.
The conversion of CoCos into shares is the only solution being considered by the bank, in the event that the SSM does not allow the repayment of the coupon, as the other alternatives (payment of coupon by issuing shares or special bonds) would be unprofitable, due to high costs and and uncertainty about whether repayment of the CoCos is realistic.
The timeline
According to banking sources, the SSM decision is expected on November 12 or 13, but will be made public about a week later, around November 20. A meeting of Piraeus Bank's board will follow to ratify the SSM decision and active the procedures for the issuance of new shares that will be acquired by the Hellenic Financial Stability Fund.
The drastic change in the shareholder structure of the bank will not cause, according to sources, any changes to management at the bank. Last week, the HFSF stated that it "has full confidence in the bank's management", while the government does not seem to favor any changes either.
What will happen to the share
According to the Piraeus Bank - HFSF agreement, in the event of converting CoCos into shares, 394.4 million new shares will be issued, which will be added to the existing 436.6 million shares, increasing the total number to approximately 831 million shares.
The issue price will be 6 euros per share, the price at which the capital increase took place in 2015 during the recapitalization, while the method of determining the number of new shares to be issued will take into account the two unpaid coupons.
After the capital hike, the HFSF's stake in the bank will rise from 26.4% today to 61.3%.
Regarding the share price, there will be no change or adjustment after the issuance of the new shares due to the corporate change. According to a decision from the Athens Stock Exchange, the price of a share is not adjusted when a convertible bond is converted into shares, when the new theoretical price is higher than the old price.
Based on Friday's closing (0.6550 euros), Piraeus Bank's market is set at 286 million euros. If the new shares issued by the CoCos conversion are taken into account, then the capitalization is set at 544 million euros. At the same time, the market value of Alpha Bank stands at 668 million euros, National Bank at 820 million euros and Eurobank at 1.055 billion euros.
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