Pepper completes €850m Bank of Cyprus distressed debt contract

The defaulted property-secured loans averaged delinquency rates of seven years or more.

The Bank of Cyprus outsourced the book to Pepper in January 2018 initially on a 30-month contract and then extended to 30 October 2020.

Pepper resolved 22.3 per cent of the book in 2019 delivering “material value to its client”, the firm said.

Pepper, which entered the Cyprus market for the first time with the contract, relocated UK staff to the island country’s capital Nicosia to develop local talent.

The team was able to draw on Pepper’s experience servicing similar debt portfolios in Europe, notably in the UK and Ireland.

Mark Caplan, country head at Pepper Cyprus, moved from Pepper European Servicing, based in London, to lead the Nicosia operation.

“We significantly reduced the bank’s non-performing exposures in 2018 and 2019,” Caplan says.

“Demonstrating our ability to mobilise a team in a new market and immediately deliver positive results directly led to further engagements in Cyprus and across Southern Europe,” he says.

“This included advising on two major portfolio loan sales, totalling €5bn, which is unprecedented in the Cypriot economy, giving buy-side underwriting advice to five of the six bidders, and technical support to the seller,” Caplan adds.

Fraser Gemmell, chief executive officer at Pepper European Servicing, says: “Establishing our Cypriot operation was strategically very important. We used our experience across other jurisdictions to support Bank of Cyprus in dealing with a heavily distressed portfolio.”

“We created a long-term, sustainable presence in the region, and we’re focused on growing this significantly in the coming years,” Gemmell says.

Panicos Mouzouris, executive director RRD at Bank of Cyprus, says: “We’re delighted with the results seen in tackling a very demanding portfolio in such a short period of time.”