Obscure points in the Alpha - Eurobank - Qatar agreement

"The issue is not whether the agreement is good or bad, but that money will roll into the new bank in the first half of 2012" (capital increase and the debenture of Qatar) a broker says, explaining in a few words why the Alpha-Eurobank deal has been met with an initial positive response.

In other words the problem is not Qatar’s interest and the placement fee, but that the money will come in the first semester of 2012.

However, it is no coincidence that a high-ranking executive of Goldman Sachs has argued publicly that for the 500 million "we would have offered better conditions."

In particular, one of the key problems of the agreement is the fact that Paramount will pay 500 million for convertible preferred securities with an annual yield of 10% and a 3-year duration.

The securities will be converted at a price of 1,70; that is, with a discount to the price of August 26. So Qatar will acquire 294 million shares (500/1,70 euro).

According to reports, besides the 10% interest and the discount, the Emir of Qatar receives a placement fee of 6% on the debenture. That means 30 million up front and the rest every year. According to a Greek broker, the fee was reasonable as it would have been bad for the deal if it had become known that the interest was 13%. It is merely the "icing" on the cake…

Moreover, following the merger of the two banks by December, 350 million Tier I admissions of 2009 will be converted. These debentures will also cause dilution for the shareholders of Alpha Bank.

According to information, most of these debentures have been given to Spyros Latsis’ interests or to members of major shareholders. And this is because they are specialized products, ahead of stock and with interest. Some of them may also be given to customers in private banking.

The crucial points of the deal are the following:

Participation in the exchange of debentures (PSI) is conditional, because the government stipulated that they should obtain 90% of the bonds. For example, information in protothema.gr shows the Agricultural Bank to be part of the program, although it was originally announced that it would not participate.

The doubtful debts of the two banks are also under conditions, although the new CEO N. Nanopoulos said the annual revenue will be addressed. Furthermore, the Greek banks do not have the high estimates of Irish banks.

If the first two issues are resolved, then the banks will merge in December. Immediately thereafter, they will be converted into common shares of the Eurobank debenture at 350 million euros.

The capital increase of 1.25 billion euros is 50% of the stock exchange value, an amount that is considered high for the market. After the increase, the debenture of 500 million euros will follow, while after the merger the share percentages will be 13% for the Latsis family, 4% for the Kostopoulos family and 17% for Paramount.