Predictions for Cyprus in 2019

Our colleagues in Cyprus look at the Cypriot business landscape


by Constantinos Ioannou

In 2018 the Bank of Cyprus completed the sale of a portfolio of non-performing loans (NPLs) to Apollo Global Management LLC, a U.S. private equity firm.  The deal involved 14,000 loans of €2.8 billion (of which €2.7 billion related to NPLs) which were secured by real estate collateral, for a gross cash consideration of some €1.4 billion.

In 2018 the Bank of Cyprus completed the sale of a portfolio of non-performing loans (NPLs) to Apollo Global Management LLC, a U.S. private equity firm.  The deal involved 14,000 loans of €2.8 billion (of which €2.7 billion related to NPLs) which were secured by real estate collateral, for a gross cash consideration of some €1.4 billion.

One would expect to see more similar transactions during 2019. Such developments are expected to radically change the approach of debt owners towards debtors and will provide new challenges for Insolvency Practitioners.

Additionally, in 2019 the so called ESTIA scheme is expected to become available.  The scheme has been put in place to manage the large number of NPLs in the Cypriot banking system and aims to ‘protect’ the first residence. However, it applies to both private and corporate loans – provided the first residence (of up to €350.000 in Market value) is collateralized.

Where the ESTIA Scheme applies, significant incentives are provided to facilitate viable restructuring of the loans – the most important of which are the haircut of the loan to a maximum balance equivalent to the Market Value of the collateral, subsidization of 1/3 of the restructured installment, and favourable interest rates. The ESTIA scheme is expected to facilitate loan reorganisations and reduction of NPLs.

One would also expect to see the new modus operandi of the Insolvency Department of the Companies’ Registrar following not only the change in leadership but also the implementation of the EY assessment as regards the Department’s internal operation and the monitoring of the insolvency profession at large.

Little change is expected in local insolvency laws apart from the introduction of the new European Union Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures. The overall objective of the text is to reduce the most significant barriers to the free flow of capital stemming from differences in member states’ restructuring and insolvency frameworks and to enhance the rescue culture in the EU.

Tourism in Cyprus will also face new challenges since the competition from neighboring countries such as Turkey and Egypt will increase, leading tourist arrivals on the island to shift from traditional countries like Russia and England to other incoming destinations such as Israel.