WOOD Flash – Siauliu Bankas: EBRD loan to be converted into shares
According to a statement published by Siauliu Bankas, the EBRD has announced that it will exercise its right to convert the loan granted in 2013 into shares in the company. The principal amount, which will be converted, stands at EUR 20m and the conversion price calculated by the bank is EUR 0.35 per share. Approval of the shareholders’ meeting is needed in order to pass this operation.Even though the conversion price is below the current market price, the loan has already been revalued in the balance sheet and stands at EUR 31.7m (as of June 2018), so the impact is neutral. The conversion should add another 57.1m shares to the EBRD’s stake, raising the total from 18.2% to 26.0%, and should strengthen the capitalisation of the bank. While the full amount will be added to equity, the regulatory capital should increase by an amount slightly in excess of EUR 10m (+5%).
We were already accounting for the potential dilutive effect of the shares in our valuation. As such, we see the conversion as completely neutral in terms of valuation, but positive in that it should bring more clarity on the capital structure and dividend policy. It also removes the revaluation effect (positive or negative) that has created volatility in quarterly financial results in the past, based on share price fluctuations.
Siauliu bankas AB is a Lithuania-based company engaged in the provision of commercial banking and financial services to private and corporate clients. It offers such services as provision of bank accounts, offering the debit and credit cards and safety deposit boxes, cash and non-cash money transfers, operations with securities, currency exchange, lending and investment services, Internet banking, financial brokerage and real estate development. It also issues monetary warranties, guarantees and other warranty liabilities, as well as performs operations with payable documents, such as checks and others. The Bank has several branches, numerous client service units and subsidiaries.
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