The restructuring of the two pending securitizations, Frontier II and Sunrise III, is due to National Bank and Piraeus Bank respectively, so that the two portfolios adapt to the requirements of Eurostat and receive the approval of the Ministry of Finance for their inclusion in “Hercules“.

The new rule set by Eurostat to include pending securitizations in Hercules is the mezzanine portion of the securitization, i.e. what is sold to investors must be at least 8% of the senior security. Thus, if securitization, for example. 1 billion euros and the senior bond is 500 million euros, the mezzanine bond must be at least 40 million euros. This rule has not been respected in most securitizations to date, and therefore Eurostat raises the issue of registering guarantees as public debt.

Frontier II for 1 billion euros, Sunrise III for 600 million euros, as well as a third portfolio under the Solar brand worth just over 1 billion euros, owned by Ethniki, Alpha and Piraeus Bank, ended up in its Hercules lobby, submitting a corresponding appeal to the Ministry of Finance to receive a government guarantee. The completion of the transactions came up against a decision by Eurostat to review all securitizations one by one to determine whether the risk taken by the state is disproportionate to the risk taken by the investors who bought the portfolios in question.

If the investigation reveals that this risk is disproportionate, a portion of the Hercules guarantees, which to date amount to €18.7bn out of a total securitization of €47.9bn, should be recorded in public debt. a point of view that slows down the process of de-escalation.

The mezzanine portion of the securitization, that is, that which is sold to investors, must be at least 8% of the senior security.

Both National and Piraeus Bank are focused on restructuring two Frontier II and Sunrise III securitizations to adapt to Eurostat’s new rule and anticipate the inclusion of these portfolios in Hercules, which expires in October. This will be done either by reducing the senior title or by increasing the mezzanine, and as for Solar, its sale is being considered.

The guarantee amount for each securitization shown in the senior portion of the portfolio represents the loans that are theoretically most likely to be collected. This is the healthiest part of bad loans securitized by banks and is averaging 39% across securitizations to date with portfolio variations. Banks hold these securities on their books.

Accordingly, the share of securitization, ie the risk transferred to investors, reflected in the mezzanine security, averages 0.9% of the total volume of securitization. Thus, the risk taken by investors on the total portfolio of 47.9 billion euros, which was securitized, is only 451 million euros.

It should be noted that the rest of the securitization of 18.7bn guarantees (senior) and 451m (mezzanine) sold to investors represents the minor part of the securitization and concerns those loans that have very little chance of recovery. This represents an average of 60.1% of the total volume of securitizations, which the banks mostly distributed among their shareholders.

AMC Attica Bank

The increase in the authorized capital of Attica Bank is approaching 470 million euros, an amount intended primarily for the consolidation of the bank, which will be carried out without the support of Hercules. This is reported by classified information before the submission to the Bank of England of the capital investment plan, which will include a plan to reduce bad loans, which, based on the shareholder plan, will be executed with other organic steps, abandoning the plan to include the three securitizations of Omega and Astir I and II of the total worth more than 2 billion euros in “Hercules”. The bank is expected to announce 6-month results today, which will reflect the evolution of NPLs without securitizations, which were assessed as costly but also urgent due to AMK’s account increase. With the planned increase, HFSF is expected to cover two-thirds and the TMEDE Ellington consortium about one-third.