Bank of Cyprus, the island’s largest lender, which will be the first so test the 2015 legislation that allows the sale of loans to third parties, is already informing borrowers about its intention in accordance to the provision of the law, which gives borrowers the right to buy back their loan, the banking source said.

“The buyer is a small Cypriot bank,” he continued adding that the total amount of loans the bank is intending to sell slightly exceeds €20m.

“They have all been restructured,” the source continued. “If the transaction goes ahead, they will be booked by the buyer as performing”.

The source said that while borrowers and guarantors have the right to buy back their loan, they will still have to pay back the loan to the fullest. The buyer on the other hand will acquire the new debt at the book value.

The completion of this type of transaction which implies a reduction of both the bank’s non-performing loans, seen at €11bn in December, overall loans and provisions, a cash inflow and no book loss as the sale will be completed at the loans’ book value, will unleash resources that can be employed to carry out additional restructurings, the press reported.

As per legislation, the introduction of which was part of Cyprus’ adjustment programme, borrowers and guarantors have the right to buy a loan after submitting an offer 45 days after the bank’s intention becomes public in the press and the government gazette.

Source: Cyprus Mail