Piraeus Bank applies to join Greece's Hercules bad loan scheme

ATHENS: Piraeus Bank, one of the four largest Greek lenders, applied to take part in the government's Hercules bad loan reduction scheme with a 1.9 billion euro securitisation, it said on Monday.

Banks in Greece have been working to reduce about 70 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 (HAPS) was put in place to help the banks offload up to 30 billion euros of bad loans.

Piraeus Bank will be the third Greek bank to apply for a government guarantee under the HAPS programme after peers Eurobank and Alpha Bank.

Piraeus Bank said it will securitise its Phoenix portfolio of non-performing loans, mainly mortgages.

Under Hercules, banks can apply for a government guarantee on the senior tranche of an NPL securitisation as long as that tranche is structured to a minimum Double B minus credit rating and they sell the majority of the mezzanine and junior notes.

"The application relates to the granting of a Greek state guarantee on senior notes with a total gross value up to 1.0 billion euros," the bank said.

Piraeus said it plans to apply to include another bad loan portfolio securitisation, dubbed Vega, with a size of up to 5 billion euros, at a later date.