BOCH: Deal with Pepper for €800 mn NPLs

The Board of the Bank of Cyprus (the “Bank”) has approved the engagement of Pepper Cyprus Limited (“Pepper”), a fully owned subsidiary of Pepper Europe (UK) Limited, to assist the Bank in resolving non-performing loans from its SME and Retail portfolio. 

According to a statement, the Bank already has a specialist in house team, containing c.220 people dedicated to the servicing of SME & Retail NPE’s. This team has built an impressive track record, delivering a net reduction in NPE’s of €1.1bn over the 18 month period to June 2017. This team is unaffected by this announcement and will continue to operate in the same way and with the same staff as it has done in recent years. 

Pepper will bring their own experienced workout professionals, initially amounting to around 40 employees, who will focus on resolving a specified portfolio of c.€800m Retail and SME NPE loans. This will accelerate the pace at which the Bank can resolve specific problematic small ticket loans, which is critical to, and entirely consistent with, the Bank’s commitment to fully resolve the NPE issue in the shortest possible time. 

Pepper will operate within the Bank’s existing Restructuring and Recoveries Division, which is headed by Nick Smith, and will be held to the same level of professional conduct that is expected of all Bank staff. 

The Bank will retain full ownership, control and responsibility for all loans allocated to the Pepper team to manage. 

This is a strategically important engagement for the Bank, and Cyprus. It improves the ability to deliver NPE reduction across Cyprus in a category of loans critical for the entire economy. 

Given that the dialog with ETYK is successfully completed, Pepper will commence their work immediately. We also expect the servicing solution to be scalable during 2018 which will allow the Bank to achieve greater pace in delivering asset quality improvements. This could also provide opportunities to assist other banks on the island in delivering faster improvements and wider strategic options. 

Pepper Group Limited, the ultimate parent entity of Pepper Cyprus Limited, Pepper Europe (UK) Limited, and their affiliated entities (collectively the “Pepper Group”) is a public company listed on the Australian Stock Exchange (ASX: PEP) with a global headcount of over 2,000 and assets under management of over €35bn. The Pepper Group is a leading specialist servicer of European Non-Performing Loans operating across the UK, Ireland, Spain and Portugal servicing in excess of €30bn for various institutional investors. 
Nick Smith, Director of RRD, said “Like most financial institutions in Cyprus, the Bank’s Retail and SME non-performing loans remain one of its biggest challenges. This partnership will see experienced Pepper professionals working alongside the Bank’s existing teams and represents a unique opportunity for the Bank to accelerate its resolution of these problem loans. The senior Pepper team have worked extensively on similar portfolios in different jurisdictions and will bring a wealth of experience and knowledge into our institution.” 

Fraser Gemmell, MD of CRE Pepper Europe, added “We are always keen to explore opportunities in new markets and a move of this significance into Cyprus demonstrates our commitment to the region. We are now seeking to place a team of 30-40 people into the Bank and relish the chance to work hand in hand with Nick and his team on this portfolio.” 

Source: Stockwatch