Further to our announcement dated August 12, 2013 and the SEC Circular dated 21/8/2013, we submit the following additional information:
The Cypriot economy has been affected negatively in recent years from the international credit crisis and the instability of the money markets. During 2012 and 2013, there was a significant decline in cash availability for borrowing mostly due to the financial instability in relation to the Greek debt crisis, including the haircut of Greek bonds and the impacts on the Cypriot economy. Also, the ability of the Republic of Cyprus to absorb borrowing from the international money markets has been limited after lower ratings. The Cypriot government entered into negotiations with the European Commission, the European Central Bank and the International Monetary Fund for financial support.
Cyprus and the Eurogroup (together with the International Monetary Fund) have reached an agreement on the main elements of a future program of macroeconomic adjustment including the offer of financial aid to the Republic of up to €10 billion. The program aims to deal with the economic challenges that Cyprus faces and to restore the viability of the banking sector for the consolidation of the public finances in the next years.
Eurogroup’s decision for Cyprus includes plans for the restructuring of the banking sector and secures deposits under €100,000, pursuant to the EU Law. In addition, the Cypriot authorities confirmed their commitment to intensify efforts in the sectors of fiscal consolidation, structural reforms and privatizations. Eurogroup asked by the Cypriot authorities and the European Commission, in cooperation with the European Central Bank and the International Monetary Fund, the finalization of the memorandum agreement in April 2013, followed by the official approval of the Board of Directors of the European Support Mechanism and the ratification by the euro area member states via the national parliaments or other equal approvals.
On April 12, 2013, the Eurogroup welcomed the agreement between Cyprus and the troika on the macroeconomic adjustment program and stated that everything is ready to launch the national procedures required for the official approval of the agreement of financial support by the European Support Mechanism.
On March 22, 2013, the House of Representatives passed the law on the imposition of restrictive measures on transactions via banks operating in Cyprus. Their duration is decided by the Minister of Finance and the Central Bank Governor and are affective from March 28, 2013. The Management of the Company is monitoring the developments and evaluates the impacts on its activities.
The uncertain conditions in Cyprus, the restricted cash availability, the loss from the haircut on deposits and the imposition of the restrictive measures together with the current instability in the banking sector and the anticipated recession could affect:
The economic conditions described above along with the impacts of the Eurogroup decision on March 25, 2013 for Cyprus may affect negatively the Company’s debtors (inability to pay their obligations to the Company), the suppliers (inability to continue with their activities), the evaluation of properties, the bankers (inability to provide sufficient financing) and the revenues (lower demand for the products or services of the Company due to lower purchasing power of the consumers).
The Management is not in the position to predict the developments that could affect the economy of Cyprus and, therefore, the impact on the future financial performance, the cash flows and the financial position of the Company.
Based on the assessment, the Management has increased its bad debt provisions and has made additional charges for depreciation in the value of the Group’s portfolio.
The Management believes that it is taking all necessary measures to maintain its viability and to expand its activities in this difficult business and economic environment.
