MNB announces sale of MKB Bank to consortium of 3 funds

Deals

The National Bank of Hungary (MNB) said it closed the sale of MKB Bank on Wednesday, selling MKB to a consortium of two private equity funds called Blue Robin Investments S.C.A. and METIS Private Capital Fund, as well as Hungaryʼs Pannonia Pension Fund, for HUF 37 bln, Hungarian news agency MTI reported.

“By selling MKB on the market, the MNB implemented all necessary actions required under the resolution procedure, and the resolution objectives were fully achieved,” the central bank said. The equity funds now hold 45% apiece in MKB Bank and the pension fund owns 10%.

The state of Hungary acquired the troubled MKB Bank from BayernLB in 2014, with the intention of reselling it by early 2016. The MNB then launched a restructuring of the bank.

In the scope of the restructuring program, the MNB separated impaired assets in the lenderʼs commercial real estate loan portfolio and sold HUF 130 bln of the exposure for about HUF 100 bln on the market. It transferred a further HUF 214 bln of the assets from the portfolio that could not be sold to the Hungarian Bailout Asset Management Company (MSZVK), an asset management vehicle, at a transaction price of around HUF 100 bln, "at real economic value" – which was higher than the market value at the time – to stabilize MKB Bankʼs capital position. The transaction price was set by an independent valuer and cleared by the European Commission, the MNB said.

The MNB noted that the European Commission had approved the state aid for the restructuring of the bank in December 2015. It added that the HUF 37 bln purchase price for MKB exceeded the HUF 32 bln of state aid, even after deductions.

The state agreed in July 2014 to purchase MKB Bank for €55 million, but only after a €270m capital increase by BayernLB.

“That means that the purchase of the bank will not cost Hungarian taxpayers anything,” National Economy Minister Mihaly Varga said at the time.

The stateʼs acquisition was closed in September 2014.

At a press conference later on Thursday, Janos Jaksa, the CEO of Minerva Tokealap-kezelo, which manages the METIS Private Capital Fund, said an "informal dialogue" with the EBRD is ongoing on the possible acquisition of a stake in MKB Bank. The EBRD typically acquires 15-20% in a bank, he noted, adding that a stand on the matter would be taken by the end of the year.

An employee-share program, expected to involve 15% of MKB Bank shares, will also be launched, he said.

Jaksa said all three of MKB Bankʼs new owners come with broad experience on money and capital markets as well as a familiarity with Hungarian and international banking markets. They want to share this professional experience with MKB Bank, he added.

Barna Semsey, an advisor for Blue Robin Investments, said Blue Robin and METIS are collective investment entities and disclosure of their investors is not required.

JP Morgan was tasked with finding a buyer for the bank, said Sergei Galperin, a managing director with the investment bank. None of the three would have put up the purchase price alone, he added.

The buyers have approved MKB Bankʼs strategy and give their full support to the management, Jaksa said, adding that he expressed the opinion of all three buyers. In line with a commitment made to the European Union, they aim to list MKB Bankʼs shares on the bourse by the end of 2019, he added.

Blue Robin owner Rakesh K. Aggarwal said his fund wants to invest in European financial institutions, thus he was pleased that JP Morgan approached it on becoming involved in the MKB Bank purchase.

Pannonia Pension Fund has participated in a number of stock market investments and is interested in dividends and increasing value, which is why it wants to be involved in MKB Bankʼs future restructuring, said Balazs Benczedi, the head of the fundʼs management foundation, Pannonia CIG Alapkezelo. 

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