The bond is pledged as collateral with the European Central Bank (ECB).

Part of the amount repaid will be used to reduce ECB and ELA funding, as has been recent practice by the current administration.

In its first-quarter results report, Bank of Cyprus said it had reduced the emergency liquidity assistance (ELA) from a peak of €11.4 billion in April 2013 to 6.9 billion, while post-results, it said it further lowered the facility to €6.4 billion by the end of May.

“With the bond transferred to the bank at fair value at the acquisition date, there will be an accounting profit of about €33 million resulting from this transaction,” Bank of Cyprus said in an announcement, adding that, “the net interest income of the bank going forward will be negatively affected by the early repayment of the bond, primarily driven by the upfront recognition of the accounting gain.”

The bank said that the remaining amount of the bond of €340 million will be replaced on its maturity on July 1 by a new bond for the same nominal amount, with pricing based on the Cyprus government yields prevailing at the time.

The government’s repayment follows the recent offering of a €1 billion bond at a coupon of 3.875% and yield of 4% maturing in 2022.

Last year, the government had initially repaid €950 million of the ex-Laiki bond on July 1, 2014.

As at the end of the first quarter, the Bank of Cyprus Group’s total assets amounted to €26.7 billion and total equity was €3.5 billion. Its first quarter results saw after-tax profits of €29 million, a turnaround from a loss of €337 million in the last quarter of 2014, but non-performing loans (in arrears form more than 90 days) totalled €12.79 billion and accounted for 53% of gross loans.

Source: Financial Mirror