Last April, Lombard Bank’s shareholders turned down a proposal for the bank to buy the shares itself. Photo: Chris Sant Fournier

The sale of around €50 million worth of Cypriot shareholding in Lombard Bank has been stalled for months due to a legal issue in Cyprus, according to sources.

So far, neither the Cypriot nor the Maltese stakeholders have officially declared what is holding up the process.

The process was meant to have been concluded at the end of July, according to confidential documents, the sources told the Times of Malta.

A spokesman for the Malta Financial Services Authority said the process was still ongoing. “The MFSA is in contact and coordinating matters with all related parties as required,” he said.

Bidders who spoke to this newspaper on the condition of anonymity said they had heard nothing since spring and were completely in the dark as to where the process had stalled.

About 20 pre-qualified bidders made indicative offers in early April, according to Investment Bank of Greece documents. The Greek financial institution is acting as legal adviser to the seller, Cyprus Popular Bank. Cyprus Popular Bank was bailed out by the Cypriot government during the financial crisis and must now sell its 49.01 per cent shareholding to repay taxpayers.

At last April’s annual general meeting, Lombard Bank’s shareholders turned down a proposal for the bank to buy the shares itself, and things got stuck at that stage, according to sources close to bidders.

The bidders made indicative financial offers but, to be able to give more accurate, binding bids, they required access to a so-called data room – a virtual room giving access to the financial information of the bank beyond the published accounts. However, the sources noted, this data room was never made available and the bidders were not even told whether they had been shortlisted, as Investment Bank of Greece guidelines had said they would be.

The prevailing situation meant there was “considerable confusion” as to where the process was at the moment, the sources noted. They said the bidders had recently been told the Joint Financial Stability Board – made up of delegates from the Malta Financial Services Authority with a majority of delegates from the Central Bank of Malta – was given the list of bidders but decided not to opt for any of them.

A Central Bank spokesman said when contacted the Joint Financial Stability Board “has never reviewed bidders for shares in any other party”.

The MFSA would not comment when asked about what was holding up the process.

The binding offers were supposed to be made in July, with the process to be concluded by the end of that month.

One source said bidders who had put considerable time and money into the process were furious and wanted to see whether any European procurement rules had been breached.

The European Central Bank would not comment on the matter, apart from noting it had no role to play at this stage of the process.

The source said: “One bidder’s investment partner is a top financial company and it is appalled that the sale procedure of a listed company should be conducted in such an opaque way.

“They simply cannot understand why all the bidders have been ignored and why none of them has been contacted to address any concerns, as should have been done according to the process letter.”

Financial services sources said the delay caused problems for the Investment Bank of Greece, which clearly wanted the issue to be sorted without any more foot-dragging and was under pressure from the Cyprus Resolution to recoup the Cyprus Popular Bank’s bailout money for Cypriot taxpayers.