Why is Lone Star chasing Bank of Cyprus?
Bank of Cyprus has its quirks – such as a sanctioned oligarch as a large shareholder – but it is far from the only European bank with good potential still shunned by mainstream investors.
Dallas-based Lone Star’s bid for Bank of Cyprus looks very different from its takeover of Portugal’s Novo Banco. It also stands in contrast to other big US private equity purchases of European banks over the previous decade. Those typically involved deep restructurings and involved banks that could only turn to US financial sponsors to meet European Union privatization deadlines after massive bad-debt pile ups and state bailouts.
Recent deals in this latter vein have included Lone Star’s 2017 purchase of Novo Banco, which involved the good bits of the defunct Banco Espirito Santo. The Cerberus-led purchase in 2018 of HSH Nordbank, now Hamburg Commercial Bank, as well as Apollo’s 2015 purchase of Slovenia’s NKMB and purchase of an interest in Italy’s Banca Carige followed the same pattern.
Wilbur Ross acted as a cornerstone investor to Bank of Cyprus's €1 billion share offering in 2014, following its 2013 depositor bail-in, although Ross never exerted full control.
When Panicos Nicolaou took over as chief executive in late 2019, Bank of Cyprus was still labouring under a non-performing loan ratio of 30%.