Athens: Greece’s Alpha Bank said on Wednesday it would aim to raise €1.66 billion ($1.78 billion) by selling new shares to help fill a €2.74 billion (Dh10.8 billion) capital shortfall revealed by a European Central Bank (ECB) health check.

Greece’s fourth-largest lender said the share offering, without rights for current shareholders, would take place via an international book-building expected to complete by November 16.

Alpha Bank is one of four big Greek banks recently identified as having capital shortfalls in a so-called comprehensive assessment carried out by the ECB, which included an asset quality review and a stress test.

The ECB’s health check revealed a €2.74 billion shortfall under an adverse economic scenario, and a 263 million capital hole under a baseline scenario — the smallest gap among the four Greek lenders.

Alpha, currently 66.2 per cent owned by the country’s bank rescue fund HFSF, has already launched a debt exchange offer to bondholders to swap up to €1.1 billion of junior and senior debt for new shares.

Full take up in this so-called liability management exercise will help generate equity capital, reducing its capital need to €1.66 billion.

“We are starting our book-building so that coupled with the liability management exercise we will not need state aid,” said an official at the bank, declining to be named.

Debt swap

Any part of the capital shortfall identified under the ECB stress test’s “adverse” scenario that is not filled by the share offering and the debt swap will be covered with state aid provided by the HFSF rescue fund.

If needed, the Hellenic Financial Stability Fund (HFSF) will provide the capital support by buying a mix of contingent convertible bonds (CoCos) and new shares the bank will issue in a ratio of 75 per cent CoCos and 25 per cent new stock.

The CoCos will pay an annual coupon of 8 per cent.

Alpha has called a shareholders meeting on November 14 to for approve the capital raising plan.

Citigroup and J.P. Morgan Securities are joint global coordinators for the offering and joint bookrunners together with Barclays Bank. BNP Paribas, Commerzbank, Nomura International and Keefe, Bruyette & Woods, are co-lead managers.