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Apollo close to buying Cyprus NPLs

Apollo Global Management LLC is the preferred bidder to buy a non-performing loan (NPL) portfolio being sold by Bank of Cyprus Holdings Plc according to people with knowledge of the matter.

Apollo buying Bank of Cyprus NPLsBLOOMBERG reports that the Bank of Cyprus and Apollo Global Management LLC are in talks in London to finalize details of the sale of a roughly €3 billion portion of the lender’s non-performing loans (NPLs), the people said, asking not to be identified because the information isn’t public. A spokesman for Apollo declined to comment.

Cypriot and European officials have been urging the Cyprus banks to reduce the amount of NPLs on their books, aiming to avoid a repeat of the island’s 2013 economic crisis. U.S. funds have been circling southern European banking assets, with Lone Star acquiring a multi-billion-euro Spanish property portfolio in June.

Despite Cyprus’ sharp economic recovery over the past five years, NPLs still weigh on banks’ profitability and have prevented significant improvement in the financial health of households and companies, the International Monetary Fund said in July. The European Commission and European Central Bank earlier this year called on the country’s banks to prioritize reducing bad loans.

Bank of Cyprus reported some progress in its first-quarter earnings, saying it had reduced bad-loan exposure for a 12th consecutive quarter.

With the NPL sale progressing, Bank of Cyprus said earlier Wed it would move the date for its second-quarter results to Aug. 27 from Aug. 23.

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  • Ed: Apologies to all – correction to my earlier replies to comments:

    Apollo is buying the loans, not the collateral (BoC can’t sell the collateral, as it does not own it – it belongs to the borrower). Borrowers will owe money/loans to Apollo.

    Apollo will restructure the loans, enter into debt for asset agreements, foreclose, etc in order to recover the loan balance (which total €5.7 billion).

  • LT says:

    Thank you editor for explaining. I thought they are allowed to sell the whole contract to the third party.

    Jill, obviously Apollo will have more persuading tactic to get their money.

    it is interesting to see that bank is selling their NPL assets at quarter of the price, but would give much brake to their own clients and their families who are in ridiculous debt because of banks, developers, government and lawyers mess.

    it will be interesting to see what Apollo is going to do with those properties, land etc.

  • Jill says:

    Sorry – I’m obviously dead thick but I don’t understand any of this!!! What is the point of another company taking on these NPLs when they can’t actually get the money back. Let’s face it, most of these NPLs are owed by the developers, not ordinary people. I would have thought that a separate company from these local banks (who obviously are related to/friends of those same developers!!!) would be able to force the developers to pay back all the billions they owe. After all, they’ve managed to hide away all the money they have for all these years causing us dopey Brits who got taken for a ride originally (14 years and still no title deeds because of one excuse or another!!) to live with the worry hanging over our heads of losing our home which was paid for the day after we arrived in Cyprus. How many of us would have bought here if we’d known then what we know now!!!!

    Ed: By buying the NPLs at a discount price (reported to be €1.4 billion), the company acquires the underlying collateral (reported to have a contractual value of €5.7 billion and a gross book value of €2.8 billion).

    Having acquired the collateral the company can sell it on the open market to recover its investment and make a profit.

  • LT says:

    This is a bit concerning. what if a buyer wants to sue BoC for Swiss Franc mis-selling of the loan and BoC sold that loan to Apollo? What happens then? Are they going to sell all of the non-performing loans? even the ones without title deed? What if there is no guarantor and collateral is the property itself?
    Wasn’t there an interim judgement regarding Swiss franc loans in favour of buyer?

    Ed: Apollo doesn’t buy the loans, they buy the underlying collateral that was repossessed by the bank.

  • dave pottinger says:

    What if any progress has been made with reference to the Swiss franc mortgage debacle. Have any cases been won which are in favour of the plaintiff at all? What has happened with reference to the European high court’s decision on this mess?

    Ed: As far as I am aware cases of the alleged mis-selling of CHF loans have yet to be heard in court – but I know there have been numerous negotiated settlements.

    The ECJ ruling has not affected the situation in Cyprus (yet).

  • Waheed Akhtar says:

    Has there been any case of mis-selling concluded in the favour of the debtors for defaulting. Has any property yet been confiscated from uk on the basis of non payment of these loans. What’s the general opinion about the possible conclusion to this dreadful situation where people not have lost their massive deposits but also may lose their homes in Uk.

    Ed: As far as I am aware, none of the cases of alleged mis-selling have been heard in court.

  • Cooking the Books says:

    @Ed I wish you could find out what portion of the BoC’s NPLs they are buying because I have a feeling this deal could be like Apollo 13 in that they could be buying a pile junk that has exploded in mid air and landed in Dodge Island 🙂

    Ed: You’ll need look at the BoC’s Annual Report. The Cyprus Central Bank publishes aggregate data and reports that their total NPLs at the end of March stood at €19.9 billion and accounted for 43 per cent of their total loan portfolios.

    BoC is the island’s largest lender – I’ll leave you to do the guess work.

  • Waheed Akhtar says:

    What do you guys think, if this Apollo buy the loans are they than going to be in a position to pursue the people owning the loans? If so what legal battles would they have to have to pursue these loans.

    Ed: There is no reason why Apollo should chase the debtors; they don’t owe Apollo any money. They would sell the underlying collateral to recover its investment and to make a profit.

  • Cooking the Books says:

    @Ed Ah so the Bank can easily obtain the Title Deeds ? Assuming all the collateral they accepted was built on land mortgaged by them to the Developer of course !

    This could pave the way for lots of repossessions however I suppose Apollo would still have to rely on the Cyprus Court not freezing their repossession action ?

    Ed: The banks would have ‘first claim’ on the collateral they mortgaged and the owners of the collateral would have agreed to return it to the banks – or the banks would have repossessed it. So Title to the collateral would be registered in the name of the bank.

    So the bank could not step in to prevent the transfer (unless Apollo failed to pay them.)

  • Cooking the Books says:

    Poor old Apollo must think that the Republic of Cyprus is an upstanding EU member with a western style legal system otherwise they would just laugh at the offer to purchase non recoverable unsecured untitled collateral with guarantor protection !!

    It will be interesting to see how much the €3bn of NPLs sells for. That should give a good indication as to the real value of Cypriot collateral.

    Ed: The collateral is titled – owned by the bank.

  • Aggis Demetriou says:

    I don’t thing they will be buying any Swiss franc loans.

  • Deanna says:

    Yep; wipe the slate clean then repeat all over again…

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