Taxpayers may still have to pay even after coop sale Updated

first_imgCypriot taxpayers are still not done with the state-owned Cooperative Bank and may be asked to cover future contingent liabilities of unspecified value, experts say.“I am not sure whether we are done with those €4bn, there may be a need for more money,” said economist Marios Clerides, who served as the Co-op’s top executive until mid-2015.He was referring to the €2.35bn government bond issued a month ago and the capital injections of almost €1.7bn that preceded it in 2014 and 2015.The latest bond issue aimed at allaying concerns over the lender’s future amid fears of the need of additional provisions that would cause a capital shortfall.Clerides said additional support may be required depending on the outcome of the negotiations initiated by the Co-op to sell its assets, which already attracted interest from three potential buyers, Hellenic Bank, Cyprus’s third largest lender, and two US funds.“The buyers are likely to press for a lower price for the assets they will acquire in order to achieve a higher return,” he explained, adding that possible layoffs of unneeded staff could also prompt the government to offer compensation to affected workers at the lender, in which the government has a stake exceeding 99 per cent.On Friday, Finance Minister Harris Georgiades signalled that the government was ready to jump in and support affected staff.“The state has the capacity and willingness one way or another to offer security to workers,” the minister said after a meeting with Andreas Matsas, the head of SEK, one of the two largest unions in the private sector, according to the Cyprus News Agency. “We are in anticipation of investor interest and therefore there’s nothing concrete to be said”.The government has acted in a similar fashion already in the past with companies that went out of business, such as in the case of Cyprus Airways or its subsidiary Eurocypria.Moody’s Investors Service, which downgraded the Co-op’s baseline credit assessment from a “caa2” to “ca” last month, just days after the lender announced its intention to seek investors, did not rule out further taxpayer’s money flowing into the bank.“The potential piecemeal sale of Cyprus Cooperative Bank reflects its solvency challenges and our view is that the bank has a provision shortfall which will have to be filled either through a capital increase, with funds coming from private investors or the government, or through the sale of the bank’s assets and liabilities,” said Moody’s analyst Melina Skouridou in an interview.The bank which in exchange for the issued bonds received a €2.5bn liquidity injection from the government in the form of a deposit backed by collateral worth €7.6bn comprising mainly of non-performing loans, made slow progress towards reducing its delinquent loans in the years following the crisis.This was partly because of the foreclosure and insolvency legislation, which was rendered toothless by lawmakers.Former Hellenic Bank executive Yiannis Telonis said that the liquidity injection from the government showed that the problems the bank was facing “were deeper than assumed”.“The bank did not have clear targets,” he said. “It was initially aiming at a listing at the Cyprus Stock Exchange, then they were talking about donating stock to its customers and later switched to a listing in Ireland,” Telonis said.“The buyout is not going to be an easy undertaking, but it has to be successful otherwise we are heading towards adventures,” he added without specifying.The Co-op has given an extension of the deadline for the buyers to submit binding offers until mid-May.You May LikeiBoosterIngenious device for $49 brings fast Internet back homeiBoosterUndoNewsXoXo6 Reasons of Heart Arteries Start Clogging You Never Knew!NewsXoXoUndoSoftware AdviceCloud ERP vs. On-Premise ERPSoftware AdviceUndo LED-lighting the way by 2020UndoFilm review: Child’s Play ***UndoGreece to overturn law that made universities no-go zone for policeUndoby Taboolaby Taboolalast_img read more