July 28, 2014 / 11:21 PM / 3 years ago

UPDATE 2-Bank of Cyprus says private placement raises 1 bln euros

* Bank of Cyprus attracts U.S., EU investors

* Equity private placement raises 1 billion euros in fresh capital

* First bank to bail in deposits in euro-zone crisis (Adds background, description of the equity offering, Bank of Cyprus CEO’s comments)

By Michele Kambas and Laura Noonan

NICOSIA, July 28 (Reuters) - Bank of Cyprus, the Cypriot lender that recapitalised by seizing its clients’ deposits last year, said it had raised 1 billion euros in a private placement on Monday, drawing in investors from the United States and Russia as well as from an EU-controlled bank.

The European Bank for Reconstruction and Development, partly owned by the European Union, and investors represented by U.S.- based billionaire Wilbur Ross were among the parties signing up to participate in a 1-billion-euro equity issue pricing Bank of Cyprus at 0.24 euro per share, the Cypriot bank said.

The issue, which executives said represented the single largest foreign investment made in Cyprus, would allow the bank to accelerate implementation of a restructuring plan after it was almost crippled by onerous terms of a bailout for Cyprus in early 2013.

Bank of Cyprus made history in the euro zone’s debt crisis as the first bank forced to convert uninsured deposits into equity as a condition for cash-strapped Cyprus to receive 10 billion euros in bailout aid from the EU and the International Monetary Fund.

The bank, badly hit by its exposure to debt-crippled Greece, was under the control of the island’s central bank for several months last year.

Monday’s issue will take the bank’s core Tier 1 capital to 15.1 percent from its present level of 10.6 percent.

“The success of the private placing demonstrates the confidence that international institutional investors have in the Bank’s turnaround and the economic recovery in Cyprus, only a year after the Bank exited resolution status,” said CEO John Hourican, a former RBS senior executive who took over the helm of the Cypriot bank last November.

Ross, who made his name and his money by resolving bankruptcies, is known for taking punts on the euro zone’s banking recovery.

His earliest - a bet of 290 million euros on the Bank of Ireland in 2011 at the height of the Irish crisis - made him a profit of 500 million euros when he sold his stake earlier this year.

More recently, the 76-year-old American billionaire invested in the recapitalisation of Greece’s Eurobank in April with fellow Bank of Ireland investor Fairfax Financial. He has also spoken of exploring opportunities in Italy, Portugal and Spain.

In a statement released through the Bank of Cyprus, Ross said investors he represented were committed to buying about 40 percent of the placement.

Under a phased-in approach to raising capital, the private placement is to be followed by offering existing shareholders the ability to buy into the bank, acquiring up to 20 percent of the shares offered in the private placement.

Many of those shareholders are among those singed by the bail-in, which converted 47.5 percent of their cash deposits exceeding 100,000 euros into equity.

The procedure, known as a clawback, would then adjust allocations to investors in the private placement so the total gross proceeds would still remain at 1 billion euros, the bank said. Technically, that would mean that if existing shareholders do decide to exercise their right, 200 million euros in new equity would be allocated to them and 800 million to new shareholders who subscribed to Monday’s private placement.

Pre-clawback, bailed-in depositors will own 53 percent of shares, a London-based spokesman for the bank said.

The Bank of Cyprus would subsequently make 100 million euros in new shares available to both new and existing shareholders, according to the bank. ($1 = 0.7442 Euro) (Reporting by Michele Kambas in Nicosia; Additional reporting by Laura Noonan in London; Editing by G Crosse and Jan Paschal)

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