Pimco takes big step in Greece’s NPL market

Pimco, a unit of German conglomerate Allianz, is understood to be on the verge of closing the purchase of Project Cairo, a €7.4 bn securitized pool of Greek non-performing mortgage loans. It has also been selected as the exclusive party on the sale of a majority stake of up to 80% in the largest management company in Greece, Financial Planning Services (FPS), which manages roughly €23 bn of assets. Both transactions - due to close by the end of this month – are part of a push by local lender Eurobank to reduce its NPL exposure.

It would be the third transaction secured by Pimco in Greece this year. In June the company agreed to buy the mezzanine and junior notes of Project Pillar, a €2 bn NPL portfolio secured against 44,000 residential assets in the country. Vendor Eurobank retained a 5% stake as well as the senior note tranche. The sale was valued at about 58% of the total gross book value of the portfolio, the bank said, based on the nominal value of the senior notes and the sale price of the mezzanine tranche.

Last year Eurobank – in which Pimco holds a 5% stake - also agreed a major recapitalisation by way of incorporation of local property owner Grivalia Properties. Eurobank, Greece’s third-largest lender by assets, said that it would own a real estate portfolio valued at €2.2 bn following the operation.

The unusual move – basically a capital injection in the form of real estate assets – made Eurobank the best-capitalised of Greece’s four systemic lenders, while also clearing the way for Eurobank’s large pile of non-performing loans to be reduced at a faster rate, according to Fokion Karavias, Eurobank’s chief executive.

‘The proposed merger is a landmark deal for the bank,’ he said at the time. ‘It will enable the bank to attain the highest total capital ratio in Greece and to accelerate the reduction of its non-performing exposures through a large-scale securitisation.’