Greek group Piraeus Bank has turned down US investment fund JC Flowers’ offer for its local subsidiary, Piraeus Bank Romania. The American fund, which is managed by a former Goldman Sachs executive, may decide to pull out of the Banca Carpatica takeover as well, as the two transactions were connected. JC Flowers aimed to take over several medium and smaller banks and create a top 10 player.

Piraeus Bank and JC Flowers had initially reached an agreement on the deal’s main aspects, but the Greek group’s board later introduced several conditions. In the end, it stopped the negotiations, according to several sources in the banking sector quoted by local business news site Profit.ro.

The Greek group may have another offer or simply gave up the plan of selling its Romanian subsidiary for the moment.

One of the factors that may have also had a negative influence on negotiations was the law that defines giving in payment, which the Romanian Parliament has recently approved. It allows the mortgage debtors to get rid of their debts to banks by giving the mortgaged assets to the banks.

This law could severely affect the real estate portfolio of Piraeus Bank Romania as the lender has a large portfolio of loans in Swiss francs, for which the money that needs to be paid back exceeds the value of the mortgaged real estate assets, according to Profit.ro.

The US fund is now considering whether to proceed with the acquisition of a 25% stake in the local bank Banca Comerciala Carpatica (BCC). JC Flowers has agreed with local investor Ilie Carabulea and other shareholders that together hold a 57% stake in BCC to buy some of their shares, according to an announcement made in September.

In addition to that, the American fund also agreed to subscribe to the bank’s capital increase through a private placement of RON 110 million (EUR 24.3 million), which should allow it to take control of the bank.

Banca Carpatica has been looking for an investor to bring new money and capitalize it after going through a very difficult period in 2008-2011. In early 2014, Romania’s National Bank (BNR) intervened and asked Carpatica’s management to find a new investor to take over the bank. BNR also suspended the voting rights of the controlling shareholders, grouped around Ilie Carabulea, one of Romania’s richest.

BNR made this harsh decision after Carabulea had been arrested for a second time in a corruption scandal involving his insurance company, Carpatica Asig, and high officials of the Financial Supervisory Authority (ASF), in early 2014. Carabulea is now under judicial control and will stand trial.

Banca Comerciala Carpatica has a market share below 1% and posted a loss of almost EUR 4.8 million at the end of September. Piraeus Bank had a market share of about 2.4% at the end of last year. JC Flowers would have reached a market share of over 3% if it had acquired both lenders.

The US fund has also made offers for the banks Credit Agricole Bank and Banca Romaneasca, but their shareholders said that they didn’t yet plan to sell their Romanian subsidiaries. Marfin Bank was also on the fund’s potential takeover targets.

US fund, close to acquiring two banks in Romania

Former Goldman Sachs manager’s fund, in race for Romanian Banca Carpatica

Diana Mesesan, diana@romania-insider.com