Kedipes repays €1 billion to state — concerns about foreclosures persist

State-owned Cyprus asset management company Kedipes has repaid €1 billion to the state for the aid it received, since its inception nearly five years ago, according to chairman Lambros Papadopoulos.

“The amount of one billion in cash is considered satisfactory, taking into account the significant internal and external challenges that the company has faced since the start of its operations,” Papadopoulos said on Monday, adding that real estate amounting to approximately €140 million will soon be transferred to the state.

During the first quarter of 2023, a payment of €60 million took place, increasing the total amount of cash repayment of state aid to €940 million, since Kedipes’ launch in September 2018, until the end of the first quarter of 2023.

Additionally, following a decision by the board of directors, a payment of €60 million was carried out on June 15, 2023, further increasing the total amount of cash repayment of state aid to €1 billion.

According to Papadopoulos, Kedipes also maintains additional cash reserves of approximately €150 million, including €60 million for possible future property purchases within the framework of the ‘Rent for Ownership’ scheme.

In addition, a positive response from the European Commission’s Directorate-General for Competition is expected soon for the implementation of the scheme, Papadopoulos explained.

First quarter financial results

The total cash inflows for the first quarter of 2023 amounted to €106.7 million, marking a decrease of 6.5 per cent compared to €114.1 million in the fourth quarter of 2022, and a decrease of 8.3 per cent compared to €116.3 million in the first quarter of 2022.

It should be noted that the cash inflows of €105.6 million for the first quarter of 2023, stemming from the management of both loans and properties, include the completion of the sale of specific high-value properties, excluding which, the related inflows for the quarter decreased by 24 per cent compared to the first quarter of 2022.

“Kedipes’ cash inflows have been under significant pressure due to the cumulative effect of the ongoing general suspensions of foreclosures, an issue that we have warned about in the past,” Papadopoulos noted.

Additionally, the problems that arose following the prolonged attack on the Land Registry’s systems also had a negative impact, he explained, noting that the resolution of the above challenges helped improve the results for the second quarter of 2023, with comparable cash inflows to those of the first quarter.

Moreover, the cumulative cash inflows from the start of Kedipes’ operations on September 1, 2018, until March 31, 2023, amounted to €1.77 billion.

The receipts from the management of loans and properties amounted to €1.69 billion, accounting for 21.1 per cent of the nominal value of the loan and property portfolio, itself amounting to €8.05 billion as of September 1, 2018.

The operating expenses and property management expenses for the first quarter of 2023 amounted to €26.9 million, an increase of 3.7 per cent from €25.9 million in the fourth quarter of 2022 and a decrease of 4.6 per cent from €28.2 million in the first quarter of 2022.

Furthermore, grants, at face value, totalled €6.12 billion at the end of the first quarter of 2023, down from €6.14 billion at the end of the fourth quarter of 2022 and €6.37 billion at the end of the first quarter of 2022.

The total deleveraging from the start of Kedipes’ operations from September 1, 2018, until March 31, 2023, amounted to 16.9 per cent, and when excluding contractual loan interest, amounted to 35.3 per cent.

The total restructuring or recovery solutions, which took place through the responsible management company, Altamira, amounted to €93 million for the first quarter of 2023, compared to €179 million for the fourth quarter of 2022 and €144 million for the corresponding quarter of the previous year.

“The decrease is due to the reasons mentioned above, which had a negative impact on both the restructuring, recovery solutions and property sales,” Papadopoulos noted.

The total amount of restructuring solutions implemented from the start of the company’s operations until the first quarter of 2023 amounted to €3.36 million, accounting for 45.6 per cent of the initial loan balance of €7.37 billion.

The asset data at the end of the first quarter of 2023 amounted to €6.82 billion at face value and included cash of €148 million, real estate with a total value of €525 million, and serviced grants of €660 million.

The total amount of deleveraging from the start of operations from September 1, 2018, until March 31, 2023, amounted to 17.2 per cent, and excluding contractual loan interest, amounted to 33.7 per cent.

In addition, net cash flows, after payment of expenses and obligations for the first quarter of 2023, amounted to €78.3 million, a decrease of 11.1 per cent compared to €88.1 million for the fourth quarter of 2022, and a decrease of 10.7 per cent compared to €87.8 million for the first quarter of 2022.

Cumulatively, since the start of Kedipes’ operations, the net cash flows after payment of expenses amounted to just over €1 billion.

Concerns about foreclosures

“We are concerned about the proposed legislative proposals which are currently in the spotlight,” Papadopoulos said.

“These involve changes to the legal framework governing foreclosures, with the aim of suspending or terminating the foreclosure process, based on reasons which include disputing and challenging the remaining debt owed to the bank,” he added.

What is more, he noted that, as mentioned in the letter submitted by Kedipes to the House Finance Committee, the proposed amendments will deprive the company of the ability to effectively use the tool of foreclosures, where deemed necessary, and consequently will have negative effects on cash inflows, resulting in a reduction in Kedipes ability to repay the state.

Asset Protection Scheme

Regarding the Asset Protection Scheme (APS) concerning Hellenic Bank, the conventional value of the assets covered by the scheme as of December 31, 2022, amounts to €1.56 billion, compared to the original €2.60 billion, reflecting an overall decrease of 40 per cent since the start of the scheme.

The reference value of the assets as of December 31, 2022, amounts to €1.22 billion, compared to €2.271 billion at the start of the scheme, with the reference value representing the amount covered by the scheme. This represents an overall decrease of 46 per cent from the start date.

“Within the scheme’s framework, Hellenic Bank has submitted claims totalling €105.5 million between September 1, 2018, and December 31, 2022,” Papadopoulos said.

Kedipes has made total payments of €78.2 million, a share of 74 per cent of the claims submitted to date.

“Kedipes and Hellenic Bank are in the process of consultation to confirm the remaining amount of the claims,” Papadopoulos explained.

Finally, the total amount of payments made by Hellenic Bank to the Republic of Cyprus as the guarantor of the scheme currently stands at €43.1 million.