Greece's Piraeus Bank Is Said to Face Capital-Raise Deadline

(Bloomberg) -- Greece’s second-biggest lender has been told by the European Central Bank to increase its capital this year, a task complicated by the country’s limited access to bond markets.

Piraeus Bank must raise about 500 million euros ($584 million) by selling tier 2 bonds under a plan agreed with the ECB’s Single Supervisory Mechanism, two people with knowledge of the matter said. They asked not to be identified because the matter is private. Spokesmen for Piraeus, the SSM and the Bank of Greece declined to comment.

Supervisors haven’t yet taken a decision on how to proceed if Piraeus doesn’t raise the funds this year, the two people said. The company may be given some flexibility in terms of the timing, given the unfavorable conditions in the bond market, one of them said.

Greek bank stocks have, on average, lost about 34 percent of their value this year as the industry struggles to tackle a mountain of bad loans stemming from the country’s sovereign debt crisis. That’s almost three times as much as the benchmark Athens Stock Exchange General Index.

Greece's Piraeus Bank Is Said to Face Capital-Raise Deadline

All Greek lenders are rated as junk because Greece’s sovereign debt is also below investment grade. Greek sovereign-bond yields, acting as a benchmark for domestic companies and lenders, have remained high after the country’s exit from a bailout program, meaning that high borrowing costs also affect businesses.

The demand to raise funds via subordinated debt sales is part of the plan agreed with supervisors to boost Piraeus’s capital ratio. The lender has also pledged to clean up its balance sheet via sales of bad loans.

It aims to sell a portfolio of shipping loans worth around 500 million euros, called Nemo, in the first half of 2019, two separate officials said. The bank hired financial adviser Houlihan Lokey Inc. to help with the sale, the people said. An official for Houlihan declined to comment on the hiring.

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