CGD will clean up to 2800 million of accumulated losses – Cash

The Caixa Geral de Depósitos (CGD) ripped off yesterday with the plan of recapitalization, providing the first steps of the same next to the cleaning of up to € 2.8 billion in losses accumulated in previous years.

THE CGD reported yesterday to have received the approval of the European Central Bank to put the recapitalisation in progress, the authorization that led to the public bank to submit the required formal requests to the shareholder, the State, and put the operation of the foot.

The information in the database were communicated through the Commission of the Securities Market (CMVM) late in the afternoon of this Friday.

According to the CGD to the regulator of the Stock exchange, the authorization of the supervisor allows you to give the shot starting to the corporate transactions envisaged in the first phase of recapitalisation that, in this way, it will still be led by tony wright, CEO of CGD, until the end of the year, as we had already advanced.

Clear results earnings

The first step of the plan yesterday detailed by CGD then passes by an operation of financial engineering that, in total, will clean up to 2.8 billion euros of losses accumulated in recent years by the state bank. At the end of 2015, and according to the report and accounts of CGD group, the global value of the retained earnings of the bank was down by 3.4 thousand million euros.

This "coverage of losses carried forward" will focus on CGD, SA and will come in two distinct steps planned in the first phase: first, the bank will have recourse to the "free reserves and the legal reserve, in the amount of 1,412 thousand million euros, to cover the equal value of the brought forward losses of earlier years".

After, and already through a reduction of the share capital, the CGD will see released another slice of "1,404 thousand million" for "coverage of the remaining balance of the accumulated losses" but also for "coverage of reserves of the elements distributable negative". This operation aims to clear the "history" of the bank so that you can put titles of own funds together with private.

The other steps of the first phase

The cleaning loss is only one of the steps planned to move forward now, because the CGD will advance also with operations that will make the capital a kind of accordion: first, this is increased by 1.43 billion to 7.3 billion, with the integration of the ParCaixa (490 million) and conversion of the CoCos and interest (938 million).

After, the share capital of the bank is reduced by 6 billion, to 1.3 billion euros, with the extinction of 1.2 billion shares of 5 euros each. Of this reduction, and in addition to the slice already referred to cover previous losses, the remaining value "of 4.59 billion euros" will serve for "the establishment of a free reserve equal in amount," explains the bank.

Second stage: the State and the private

This increase and later reduction of the share capital of CGD will be completed by a third-stir in the capital, already in the second phase of the recapitalisation with Macedo at the helm, when the State will inject up to 2.7 thousand million in cash in the share capital of the bank. Only then will advance to the first placement of the debt from the private, 500 million.

This the second phase of the recapitalisation should occur in April 2017, ie, after the approval of the accounts of 2015 bank public.

"operations are part of a process of recapitalisation of CGD, S. A. (…) which aims at the strengthening of their ratios of capital adequacy in accordance with the agreement in principle reached between the State and the EC", details the CGD in the statement.