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UPDATE 1-Alpha Bank to sell 10.8 bln euro portfolio to Davidson Kempner

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(Adds CEO comment, detail)

ATHENS, Feb 22 (Reuters) - Greece's Alpha Bankwill sell a 10.8 billion euro ($13.09 billion) portfolio ofimpaired loans and 80% of loan services provider Cepal Holdingsto U.S. fund Davidson Kempner under a definitive agreement itannounced on Monday.

The sale of the portfolio, known as Galaxy, will be thesecond-largest rated securitisation of non-performing exposures(NPEs) in Europe after Monte dei Paschi's Sienna project, itsaid.

The deal is expected to reduce Alpha Bank's NPE and NPLratios in Greece to 24% and 13% respectively from 43% and 29% inSeptember 2020.

Reuters had exclusively reported that Alpha Bank hadselected Davidson Kempner as its preferred bidder in Novemberlast year.

The deal involves Alpha selling 51% of the mezzanine andjunior securitisation notes of the 10.8 billion euro NPEportfolio along with 80% of loan servicing subsidiary CepalHoldings.

"This is a turning point for our bank as we are making adecisive step in dealing conclusively with the legacy assetquality issues from the long-lasting recession in Greece," AlphaCEO Vassilis Psaltis said in a statement.

"In spite of the unprecedented conditions we experienced dueto COVID-19, we are proud to have managed to sign such a complextransaction in just eight months from launch," he said.

The deal puts Cepal's enterprise value at 267 million euros,with Alpha having further upside through an earn-out of up to 68million linked to the achievement of certain targets, the banksaid.

It said the mezzanine and junior securitisation notes willbe sold to an entity managed and advised by Davidson Kempner forcash, at an aggregate valuation for 100% of those notes of 40million euros.

Total proceeds for Alpha Bank, including the senior notesand the sale price of the mezzanine and junior notes, correspondto about 35% of the portfolio's total gross book value.

The sale is expected to close in the second quarter, subjectto regulatory approvals. Deutsche Bank was Alpha Bank’s leadfinancial adviser.

($1 = 0.8252 euros)(Reporting by George Georgiopoulos; editing by Jason Neely)