U.S. Markets

Eurobank to sell sour mortgage loan notes to Pimco unit

The offices of Pacific Investment Management Co (PIMCO) (R) are shown in Newport Beach, California August 4, 2015. REUTERS/Mike Blake

ATHENS, (Reuters) - Greece's third-largest lender Eurobank EURBr.AT agreed to sell mezzanine and junior notes of a 2.0 billion euro securitized pool of non-performing mortgage loans to a unit of U.S. funds group Pimco as part of efforts to clean up its balance sheet.

Greek banks are working to trim their portfolio of bad loans and meet targets on so-called non-performing exposures (NPEs) agreed with European Central Bank regulators.

Based on the deal, Celidoria, an entity owned by PIMCO, will buy 95% of the mezzanine and junior notes of the portfolio. Eurobank will retain the remaining 5% as well as all of the senior note tranche.

The sale is valued at about 58% of the total gross book value of the portfolio, the bank said, based on the nominal value of the senior notes and the sale price of the mezzanine tranche.

Eurobank said it expects to close the transaction by July, subject to approval by the ECB’s Single Supervisory Mechanism.

Eurobank also agreed to start exclusive talks with Bravo Strategies III, a Celidoria affiliate, on another pool of securitized non-performing loans, and the sale of a majority stake in its wholly-owned sour loan servicing unit FPS.

It said exclusive negotiations would start immediately and end on September 30.

Eurobank’s NPEs dropped to 36.7% of its loan book in the first quarter from 37% at the end of December, and management has said that cleaning up its balance sheet remained the bank’s top priority.

Reporting by George Georgiopoulos, Editing by Deepa Babington