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Greece's Eurobank struggles to flip loan-recovery unit to PIMCO: sources

Stock MarketsOct 04, 2019 05:31AM ET
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© Reuters. Greece's Eurobank struggles to flip loan-recovery unit to PIMCO: sources

By Pamela Barbaglia, Valentina Za and George Georgiopoulos

LONDON/MILAN/ATHENS (Reuters) - Greece's Eurobank (AT:EURBr) is struggling to finalize a deal to sell a majority stake in its loan-recovery business to U.S. money manager PIMCO, sources familiar with the matter told Reuters, after a Sept. 30 deadline passed with no agreement.

The sale is a key component of clean-up efforts at Greece's third-biggest bank, which has pledged to quickly cut the problem loans that comprise more than a third of its total lending.

On July 1 Eurobank picked PIMCO, its sixth-biggest investor, as the preferred bidder for an 80% stake in its Financial Planning Services (FPS) unit, setting a three-month deadline to reach an accord.

One of the sources said Eurobank valued FPS at about 300 million euros ($329 million) and was struggling to bridge a valuation gap with PIMCO, which judged the unit's worth at well below that threshold.

Eurobank is keen to finalize the sale of FPS, sources at the bank said, and is continuing talks with PIMCO despite diverging views on the value of the unit.

European Central Bank supervisors have been pushing southern European banks to shed loans that turned sour during the last recession. Now that economic growth in the bloc is faltering again, they are keen for lenders to step up their efforts.

Big portfolio sales have opened up a lucrative market for investors in risky assets.

Loan recovery units such as FPS, which carry with them long-term debt collection contracts, are particularly sought after, and banks have been selling them together with bundles of loans.


FPS had drawn interest from an investment consortium consisting of U.S. activist fund Elliott, U.S. buyout fund Bain and Italian credit management group Cerved (MI:CERV).

Italy's biggest bad-loan specialist, doValue (MI:DOVA), owned by SoftBank-backed (T:3248) Fortress Investment Group, also made a preliminary bid this year but failed to enter exclusive talks.

Verona-based doValue has operations in Greece and last year clinched a deal with Eurobank and three other lenders to manage 1.8 billion euros in soured corporate loans.

Set on pursuing expansion abroad, doValue this year bought Spanish bad-loan manager Altamira.

The two bidders remain interested in buying FPS and are trying to match Eurobank's price expectations, three sources said, with one adding that Eurobank may consider relaunching the process in coming weeks.

All interested parties declined to comment.

Greek banks hold 75 billion euros in impaired loans and are seen following in the tracks of their Italian rivals, which in recent years have almost halved soured debts on their balance sheets from a post-crisis peak of 350 billion euros.

Unpaid loans weaken the banking system by hurting profits and lifting funding costs due to investors' heightened risk perception, ultimately restricting the ability to lend.

Greece's Eurobank struggles to flip loan-recovery unit to PIMCO: sources

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