Piraeus, which is 66.9% owned by the country’s HFSF bank rescue fund, was found to have a capital hole of €2.21 billion under the ECB stress test’s baseline scenario and a gap of €4.93 billion under more adverse assumptions.

Piraeus and Greece’s other three big banks – National , Eurobank and Alpha – have started raising funds to plug a €14.4 billion ($15.5 billion) capital hole, a sum 4.7 times their combined market value.

Piraeus Bank’s capital plan includes a one-for-100 reverse share split, an issue of new shares without pre-emptive rights for current shareholders and an issue of contingent convertible bonds (CoCos).

The bank’s board chairman Michael Sallas told shareholders the ECB’s supervisory mechanism (SSM) approved a total of €873 million in so-called capital actions to address the capital shortfall.

These include €602 million that resulted from a so-called liability management exercise – an offer to bondholders to swap junior and senior debt for new shares.

As a result, Greece’s second-largest lender will issue new shares to raise up to €4.6 billion. It aims to gather €1.34 billion of this sum from private investors to plug the gap under the stress test’s baseline scenario.

State aid to cover the rest will be provided by the HFSF fund which will buy a mix of new shares and CoCos that Piraeus will issue at a ratio of 75% CoCos and 25% new stock.

Shareholders approved the board’s plan to issue CoCos for an amount up to €2.04 billion.

Source: InCyprus