Daily Press Review - 28/4/2020

In the press today:

Banks are fast-tracking debt restructuring schemes

A new wave of debt restructurings has begun at the banks and already enough households and businesses are sitting on the negotiating table aiming to find a solution with their banker, which is tailored to their own financial situation. The solution of restructuring instalments until the end of the year may have made things easier for borrowers who didn’t have delays of over 30 days in paying their instalments but also brought a number of cases of customers who did not meet the criteria to the surface. The banks have already started developing their restructuring products, with a view to relieve all the borrowers who are willing to cooperate, based on the new reality that was created by the coronavirus. Bankers fear that due to the current negative financial circumstances caused by the coronavirus pandemic, they will be facing another explosion of NPLs and mainly business loans, which will completely overturn their planning and everything they have achieved over the past years. As a banking source told Phileleftheros, “we are trying to help those of our customers who are facing problems and cannot “freeze” their instalments. Finding a mutually agreed upon restructuring solution is a one-way street so as to avoid an increase of red loans over the next few months, spreading into 2021. The problem does not only concern hundreds of households who found themselves in a new situation overnight, but hundreds of medium-sized companies who are unable to meet their obligations. Nearly a month after the implementation of the measure of instalment suspension and the initial flood of applications, the situation today is very different. While in the beginning, thousands of applications were submitted by borrowers every day, the number has now been limited between 100 and 300 applications per day. The Minister of Finance Constantinos Petrides had announced that the value of loans requested for instalment suspension amounted to about €10b, while the requests for instalment suspension amounted to about 50,000. Based on the latest information, Bank of Cyprus has received about 22,000 applications, 84% of which concern individuals and 16% concern businesses. The applications are linked to 37,000 bank accounts. 26,000 out of the 28,000 BoC loans do not expire in the next 12 months. Hellenic Bank had received 24,000 applications as of last Friday. 80% of loans concerns individuals and 20% concerns businesses. 50% of retail loans concern housing loans and 50% concerns consumption loans. Another interesting point is that 1 out of 5 loans for which there was an application for suspension was granted after 2018. According to Hellenic Bank’s information, 20% of candidate loans were granted after 1/1/2018 and 80% was given before this date.



SEDIPES sells entire stake in Altamira Cyprus to Spanish parent company

As part of the Republic of Cyprus’s commitment towards the European Commission, the agreement to sell off 49% of Altamira Cyprus’s share capital was signed on 24/04/2020. According to an announcement by KEDIPES, the agreement relates to the sale of Altamira Asset Management SA 490 ordinary shares with the nominal value per share standing at €1, which used to belong to the Cooperative Asset Management Company (KEDIPES). The sale price was agreed at €4.5m and an independent expert has confirmed that it complies to market terms as provided by the Republic’s commitments. It should be noted that for the completion of the sale of shares, the approval of the Commission for the Protection of Competition is required. It should be noted that the sale of the percentage previously held by the former Co-op in Altamira was one of the conditions for the state aid that aimed to facilitate the sale of operations and deposits to Hellenic Bank. The consortium of the former Co-op and the parent Spanish Altamira company had taken up the management of the Co-op’s red loans and assets. Following the closure of the Co-op, Altamira Cyprus continued its operations. However, the EU’s Directorate- General for Competition had requested that SEDIEPS departs from the share structure of Altamira Cyprus. With this process, Altamira Spain now has full control. The process of SEDIPES’ departure has come to an end and now another chapter is opening up based on the country’s commitments to the Directorate- General for Competition. The next step is conducting a competition in order to find a new servicer for KEDIPES’ loans and assets.



IMH is restarting its operations amid lockdown

Evaluating the situation due to the restrictive measures due to the virus, IMH is innovating and is “restarting” its activities amid the lockdown, by organising two online conferences, innovating once again in the conferences and events sector of Cyprus. Specifically, IMH has recently reached an agreement with a large American IT company which offers knowhow in organising online summits and events. Through this platform, the tools to conduct summits in an interactive environment are provided. The platform is question is used by the biggest professional services companies around the world, while IMH is the first Cypriot company to make use of the ON24’s tools. Responding to the new conditions imposed by the pandemic, today 28 April IMH is organising, on behalf of Invest Cyprus, a web discussion entitled “Cyprus – Covid-19 Response Plan: What lies ahead”, with speakers the Minister of Finance, Cosntantinos Petrides, the president of Invest Cyprus Michalis P. Michael and the Director-General of the Organisation George Campanellas. On 29 April, IMH is organising with the participation of over 1,500 businesspeople, CEOs, senior executives of other big Cypriot companies, senior government officials as well as media representatives, the first Online Cyprus Economic Summit Covid-19, focusing on the consequences of the coronavirus crisis on the Cyprus economy. Cyta Business presents and is a Platinum sponsor of the Summit. Hellenic Bank, Bank of Cyprus, EY, DELOITTE, KPMG and PwC Cyprus are gold sponsors.



New reduction in deposit rates

The banking system has started to lean towards zero interest rates on deposits, a trend which is expected to accelerate over the next period. The Bank of Cyprus has sent a text message to its customers that from 1 July onwards the interest rates on 8-day notice deposit accounts and 8 days e-Notice accounts will stand at 0%. The 35-day notice and e-notice accounts will stand at 0.03%. The interest rate for 90-day notice and e-notice accounts will stand at 0.07% and the 180-day notice and e-notice accounts will stand at 0.10%. As liquidity has increased significantly over the past few years and demand for new loans is very low, the banks are not competing with one another for new deposits. Despite the significant liquidity they maintain, the banks are having trouble finding sustainable borrowers to deposit new loans, as about half of individuals and many businesses already have NPLs. At the same time, the banks’ proceeds are under pressure due to the suspension of instalments until the end of the year.



Competitiveness Council: Roadmap to deal with crisis

The Economy and Competitiveness Council has proposed targeted measures to businesses in a bid to help secure jobs. It also proposes the creation of a roadmap to deal with the crisis, which will include a national plan to kickstart economic activity and help manage the recession in the mid-term. It proposes the preparation of a comprehensive plan for schools to re-open safely, and proper updates to the public in order to reinstate a climate of security, confidence and trust. The Council also proposes actions to support all the affected sectors in the short term, a targeted incentive plan to promote local tourism, a new/targeted advertising campaign for the Cypriot tourism product as well as other support/financing/funding measures to reduce electricity and fuel charges.



New bill on state guarantees

The Ministry of Finance is expected to forward to the revised bill on state guarantees amounting to €2b the House Finance Committee next week, so that banks can grant low-interest loans. An authoritative source has said that the revised bill has adopted many of the parties’ suggestions so that it can acquire the necessary majority vote at the House. In the meantime, yesterday, the Ministry of Finance replied to the proposals of parties in relation to state guarantees in an effort to find common ground. Specifically, the Ministry supports that the state’s finances will be burdened and the public debt will increase if DIKO’s proposal is adopted i.e. the creation of a special SME financing fund worth €250m, directly funded by the state. As the Ministry supports, this is not recommended as it could be considered as state aid to the banks, something which is not compatible with European regulations on state guarantees. As it comes to the Alliance’s proposal to make use of the De mininis scheme for small or very small businesses, they note that this is not permitted by the current fiscal conditions. According to a Finance Ministry memo, this could be achieved through the bill on state guarantees. Moreover, the Ministry, replying to the proposal to create a guarantee support mechanism for businesses, it notes that the bill on state guarantees does provide this possibility. In the meantime, the Ministry does not agree with the Green party’s proposal to give guaranteed loans directly from the state to businesses through the House Finance Corporation. As it underlines, the Corporation doesn’t have this capacity and would need to be supported financially. Moreover, the Ministry notes that subsidising the interest rate of export businesses or covering their salary costs is not compatible with the European state aid regulations.



The state is seeking liquidity through many channels

The state is finding it difficult to ensure the its public finances and at the same time support the real economy to tackle the economic consequences of the coronavirus. The state is missing €495m to cover its financing needs, which based on the extreme scenario will amount to €5.2b by September 2021. The amount of €495m will be reduced to €360m if the state manages to lend draw €44m in loans from selling bonds to natural persons and borrow €90m from the European Investment Bank and the Council of Europe Development Bank. The €360m gap will be covered by issuing a new European medium-term bond. At the same time the difficult fiscal situation of the sate is evident by the next moves of the Ministry of Finance. Specifically, the state is looking into borrowing from semi-governmental organisations, a practice followed also in 2012, under the administration of Demetris Christofias. The memo sent by the Ministry of Finance to the House on the occasion of the parties’ suggestions on ways to increase the state’s liquidity they leave the possibility of borrowing from semi-governmental organisations open. Another bill is also pending, according to which the EAC will be paying a contribution to the state’s funds. The bill will be discussed today at the House Finance Committee.



Cyprus-Greece ferry link moved to summer 2021

The Cyprus-Greece ferry link will not be up and running this year, instead expected to launch in the summer of 2021, Deputy Minister of Shipping Natasha Pilides told the site Brief. She was asked what stage the ferry link procedure Is at. “On the Cyprus-Greece ferry link, a request has been submitted to the European Commission for approval of the financing of the specific activity, through a state sponsorship scheme,” said Pilides. “As part of the European Commission’s examination of the study, a series of consultations have taken place and extensive information was submitted, which is at the stage of being assessed. Furthermore, we are at the stage of processing the documents for the open tender, as well as consultations with all the stakeholders in Cyprus and Greece regarding the operational and other aspects of re-operating the link, so that the necessary preparations can be made in time,” she added. Provided that the European Commission gives its approval, Pilides said the next stage will be to open the tenders and find the company that will manage the link. Asked when it is expected to launch, Pilides said: “In view of the difficult conditions we are experiencing because of the coronavirus, the complex nature of the open European tender that will be announced, as well as the preparatory work that is required by the bidders to submit their proposals, bidders will be given a longer deadline to submit their applications. The ultimate goal is to have the link up and running in the summer season of 2021,” said Pilides. The site reminds that based on previous statements by Pilides, a return ticket for the link between Limassol and Piraeus ports will cost €100 per individual, without a car, excluding port fees, which are expected to raise the price to around €130.



Larnaca doubly unlucky

There are three open wounds currently in Larnaca town, brought on by the coronavirus pandemic. Besides the economic recession and zero tourism revenue which has been blighting the entire island, Larnaca also has to deal with the suspension of plans to build the town’s port/marina, the tender for which was finally awarded just days before the coronavirus restrictions came into effect. Then there is the delay in moving the oil storage tanks of EKO from the town to Vasilikos, which was supposed to happen this month but has now been delayed. And thirdly, according to member of the town’s chamber of commerce and industry Stravros Stavrou, there has been a keen interest by foreign investors in Larnaca in recent years. The interest was expressed last year at the Cyprus-Arab convention, which was also expected to take place this April but has been cancelled.

 

 

Drillings – Definitively after 2020

The decree issued yesterday by the Health Ministry allowing entry to crew members of energy companies performing drilling activities in Cyprus’ Exclusive Economic Zone (EEZ) caused some confusion, but also hope, that drilling activities were set to begin. However, after investigating the matter, Politis found that the decree mainly has to do with drilling taking place in neighbouring EEZs. The paper learnt that the decree concerns staff that foreign companies want to bring to Cyprus to arrange and send materials for drilling taking place in neighbouring countries. Relevant requests have been submitted to the Republic by Israel and Egypt, as part of their use of Cyprus as a service base for their operations in the broader maritime area. Meanwhile, Politis’ sources say it should be considered final that there will be no drilling taking place for hydrocarbons on behalf of Cyprus in 2020. Eni has still not officially informed the government about what will happen with the drilling that was meant to take place at the Kronos target in block 6 this month. The sources said it is expected to be moved to the first quarter of 2021; provided, of course, that the situation in the international arena improves, what with the drop in demand for oil because of the coronavirus and the nosedive of oil prices, which have impacted on the financial situation and natural gas explorations of energy majors. ExxonMobil has already postponed its first appraisal drilling in the Glaucus target in block 10 until September 2021. In the meantime, the drilling by Eni-Total-Novatek in the Lebanese EEZ wrapped officially yesterday, with Lebanon’s energy minister saying no natural gas deposits were found. But some interesting natural gas structures were spotted, that may be investigated further in the future.

 

Furious

Social democrat party EDEK said yesterday that “Turkey, taking advantage of the situation that has been created with the pandemic and the suspension of plans by the licensed oil majors, has once again invaded the Cyprus EEZ with the Yavuz, west of Cyprus, and started drilling, as the Turkish Energy Minister has provocatively admitted”. Alithia comments that Turkey did not need the coronavirus to violate the Cyprus EEZ; it has been doing it for so long.



How oil may trigger a new global crisis

The oil price slump may lead to a series of domino effects on the global financial system, as many companies in the US that are active in the relatively new technology of shale oil, have borrowed huge sums from American banks. Furthermore, the drop in demand for oil brought on by the coronavirus lockdowns has led to huge losses and suspended operations for the big oil companies, which is in turn expected to prevent them from paying their debts, which is what happened in 2008 in the US when there was mass failure to repay high-risk mortgage loans, the crisis from which spread to Europe too. Speaking to Radio Proto yesterday, CFA Cyprus Society member Dionysis Sinanos said that besides the problems with servicing these debts, the developments will also lead many companies to bankruptcy, which will in turn lead to huge losses for the banks-lenders and a domino effect of dire consequences on an number of other sectors, triggering a new financial crisis. Characteristically, ExxonMobil was forced to “freeze” its drilling programme in the Cyprus EEZ and proceed with more positive and profitable extractions, so as to limit the risks.

 

 

Will they convince Larnaca?

Energy Minister Yiorgos Lakkotrypis yesterday told Politis radio that he had suggested to the Electricity Authority of Cyprus (EAC) that it uses empty oil storage tanks in Larnaca to store cheap fuel it pre-purchases, but only after consent is given by the Municipality of Larnaca. According to Politis’ sources, the minister has already spoken with the town’s mayor, Andreas Vyras, letting him know that nothing will go ahead unless the town’s council gives its consent, and that the facilities will be used for a few months. The idea to use the old storage tanks (which are meant to be dismantled following a government decision to clear up the area) arose when discussions were held over how-to pre-purchase cheap fuel now that international prices are at an all-time low, to in turn produce cheaper electricity. The EAC has already purchased 90,000 metric tons of cheap mazut, while it intends to purchase more, though it is looking for somewhere to store it. The thing is, however, that the people of Larnaca have bitter experience when it comes to government promises to move the oil storage tanks. It was finally meant to take place around this time; but the coronavirus pandemic has prevented the last remaining oil company, EKO, from moving its facilities to Vasilikos. Yesterday, Vyras told the Cyprus News Agency that he would not accept solutions or positions that will further delay the removal of the gas and liquid fuel tanks from the town’s coast. The paper reasons that if assurances are given that the storage of oil by the EAC will end before the final tanks are expected to be moved, there is leeway for the town to accept it.



Hotel and beach regulations unclear

A lot will change in the post-coronavirus era. Hotel and entertainment businesses have already started thinking of the “day after”, and while there are many uncertainties – as we don’t know when the airports will open and under which criteria tourists will be able to visit – tourism stakeholders are trying to prepare as best they can. The hotels will continue with their renovations, once the construction industry restarts; however, hoteliers are on hold. According to Phileleftheros’ sources, there are a number of ideas on the table as to specific measures hoteliers can take after the crisis. They will keep a record of all the suggestions, which are expected to be handed over to the Deputy Ministry of Tourism and epidemiology team, so that in two weeks specific decisions can be made concerning hotels and beaches. There are certain concerns, such as what happens with buffet meals and how people will keep their distance in the pool and bar areas. Or what happens if a coronavirus case is spotted at a hotel, whether it will shut down completely and who will compensate the tourist if they get ill. And there is the safe entry and exit of tourists, and ensuring that they are not infected with the virus to begin with.



Council: Roadmap to deal with crisis

The Economy and Competitiveness Council has proposed targeted measures to businesses in a bid to help secure jobs. It also proposes the creation of a roadmap to deal with the crisis, which will include a national plan to kickstart economic activity and help manage the recession in the mid-term. It proposes the preparation of a comprehensive plan for schools to re-open safely, and proper updates to the public in order to reinstate a climate of security, confidence and trust. The Council also proposes actions to support all the affected sectors in the short term, a targeted incentive plan to promote local tourism, a new/targeted advertising campaign for the Cypriot tourism product as well as other support/financing/funding measures to reduce electricity and fuel charges.



Hotels open for OKYPY

The Health Ministry issued a decree yesterday stating that among the hotels that can remain open, following consultation with the Deputy Ministry of Tourism, are those that host staff of the state healthcare organisation (OKYPY). The decree clarifies that the hotels that are exempted from the lockdown of the hotel industry will be used as “temporary hosts to healthcare professionals and other staff that works for the Organisation of State Healthcare Services for the purpose of dealing with the coronavirus”.



Makronissos Village to be upgraded

The Makronissos Village tourism complex in Ayia Napa will be fully upgraded, with parts of the complex to be demolished and new buildings built. According to the project’s environmental impact study, a new hotel will be built while existing apartments will be upgraded from Grade B to Grade A. The hotel will be six storeys, while the entire complex will offer 692 beds and will span an area of 7,289m².



Greece: Talk of the market

The last week of April marks Greece’s entry into the final stretch for the gradual lifting of the lockdown. Official announcements are expected tomorrow, with specialisation of the plan. But with consumers holding a small basket, fear of Covid-19’s hotspots and negative first signs of other countries’ “experiments”, with opening stores and services, they maintain uncertainty over the duration of the transition period before things can return to normal. The article mentions that yesterday, the Council of State discussed Hard Rock International’s (HRI) appeal about the decision to exclude HRI from the Hellinikon casino licensing procedure. This is crucial for the opening of the financial offer of Mohegan Gaming & Entertainment consortium – GEK Terna, i.e. the next phase of the tender that will activate the works for the big project.



Initiative on the treatment of masks and gloves

According to a social media post by House President Demetris Syllouris, the House Environment Committee discussed on Monday the matter the Parallel House discussed regarding the absence of a regulation on the correct management of used masks and gloves that are being used due to the pandemic. “Following the proposal of the Committee’s president Adamos Adamou, the House is now taking up an initiative to close the gap in a proper and scientific manner, considering that gloves and masks should be treated like dangerous medical waste”, the House President said. The House Environment Committee also discussed the bill on mines and the possibility to suspend payments on their behalf.



The companies with the best workplaces in Greece

Yesterday, the Great Place to Work Hellas announced the results of its Best Workplaces 2020 survey, which is the largest annual assessment of workplaces in the country. Best Workplace 2020 was held for the 18^th consecutive year, with the academic support of ALBA Graduate Business School, the American College of Greece, awarded 25 businesses, which were separated in 3 categories depending on their number of employees; 10 “large” businesses with more than 251 employees, 10 “medium-size” businesses with 50-250 employees, and 5 “small” businesses with 20-49 employees. British American Tobacco Hellas is among the “medium-size” companies awarded.