Greece's Piraeus Looks to KKR to Manage Problem Loans

ATHENS—Greece's largest lender based on assets, Piraeus Bank, said Tuesday it is looking into striking a deal with U.S. based private equity group KKR & Co. to manage €600 million ($670.1 million) of its problem loans.

Piraeus Bank's deputy chief executive, George Poulopoulos, who is also acting chief executive officer of the Greek lender, told The Wall Street Journal, that Piraeus Bank "is examining" the possibility of teaming up with KKR to restructure these loans. An announcement may be made soon after the summer, Mr. Poulopoulos said.

"It would involve the restructuring of corporate loans—debt that belongs to large potentially viable companies," said Mr. Poulopoulos.

"This won't solve the entire problem of course, but it is part of the solution. There are a lot of further steps we want to take in the management of NPLs and that is what we are doing," he added.

Greek banks have been slow in tackling the €110 billion of bad loans weighing on their books as a result of the country's crisis that has reduced the size of its economy by more than a quarter to some €180 billion.

Lenders have been reluctant to sell non-performing loans directly to private equity groups with Greek bank executives arguing that many of the large corporate loans simply need to be restructured and should not be sold off at a loss to third parties.

Better management of non-performing loans is seen as being a crucial step in the country's return to growth as it will free up funds to finance healthier companies.

Problems caused by bad loans was also a key point of discussion in a meeting between Greece's president Prokopis Pavlopoulos and Bank of Greece Governor Yannis Stournaras on Tuesday, according to a central bank official.

Piraeus Bank will be the third Greek lender to hook up with KKR in recent months, in the event of this deal being signed.

In May, KKR signed an agreement with Eurobank and Alpha Bank, Greece's third and fourth largest lenders respectively, to manage up to €1.2 billion of their underperforming assets via KKR's platform, known as Pillarstone. KKR has already rolled out a similar system in Italy for three lenders by using this same platform.

In Athens, Greece's second largest lender, National Bank, is now expected to follow suit, according to Yannis Sinapis, an analyst at Athens-based brokerage Euroxx Securities.

Mr. Sinapis said that Piraeus Bank will benefit from KKR's sophisticated collection methods and knowledge but added that the deal only involves a small part of the Greek bank's domestic troubled assets, which stood at €24.7 billion at the end of the first quarter of the year.

In a bid to help banks clean up their balance sheets, Greece's creditors—the International Monetary Fund and eurozone nations—have been pushing for management changes at lenders by introducing tougher economic governance rules.

This involved Greece's parliament late last year passing a complex and comprehensive set of rules aimed at reducing politicized appointments in the sector. These new laws are seen as removing up to a third of the country's board members, according to bank officials.

Amid the shake up, Piraeus Bank Chairman Michalis Sallas stood down from his position last month, after running the bank for 25 years, marking the departure of one of the banking sector's most prominent figures.

Write to Stelios Bouras at [e-mail]

(END) Dow Jones Newswires

August 02, 2016 10:15 ET (14:15 GMT)

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