Eurobank applies to join
 Hercules bad-loan scheme

Eurobank has applied to take part in Greece’s Hercules bad loan reduction scheme via a 7.5-billion-euro securitization, the country’s third-largest bank said.

Banks in Greece have been working to reduce a pile of about 75 billion euros in bad loans, a legacy of a financial crisis that shrank the country’s economy by a quarter.

Shedding the bad debt is crucial for their ability to lend and shore up profits.

The Hercules asset protection scheme was put in place to help the banks offload up to 30 billion euros of bad loans. 

Similar to Italy’s GACS model, the scheme was created to help lenders to clean up balance sheets and offload bad debt by turning the bundles of bad loans into asset-backed securities that can be sold to investors.

Eurobank said it had submitted two applications to the country’s Finance Ministry to “opt in” to Hercules with two securitizations dubbed Cairo I and II.

“The applications relate to the provision of guarantee by the Greek state on senior notes amounting to 1.655 billion in total,” the bank said.

An application for Cairo III will follow in the coming weeks, it said.

Overall, Cairo consists of three securitizations of different size and different types of loan claims.

Eurobank aims to reduce its ratio of nonperforming exposures to 15 percent in the first quarter.

[Reuters]