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December 4, 2007 |
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IKB DEUTSCHE: German Banks Step In for Second Risk Coverage A banking pool organized by Germany's state-owned KfW Bankengruppe will bail out IKB Deutsche Industriebank AG for the second time in under four months, agreeing to cover US$520 million in risks for the troubled lender, published reports say. The banks, along with KfW, the financial supervisor BaFin and Germany's financial watchdog, Bundesbank, reached an agreement Wednesday, without disclosing the details of the additional risks covered by the parties, the International Herald Tribune relates. The agreement, Bloomberg News reports, brings a total of up to EUR6.1 billion in potential losses at IKB and its affiliate Rhineland Funding Capital Corp., which KfW and German banking associations will cover. KfW, which holds a 38 percent stake in IKB, said Nov. 27 that it is increasing its risk shield for IKB by EUR2.3 billion to EUR4.8 billion based on new risk valuation information. The development bank has agreed in July to take over all of IKB's obligations related to Rhineland Funding when the vehicle's commercial paper couldn't be sold to investors following the U.S. subprime crisis, Bloomberg relates. IKB has earlier notified Bundesbank and BaFin that it could face more liquidity problems if it fails to secure necessary financing to continue operations. About KfW Bankengruppe Headquartered in Frankfurt, Germany, KfW Bankengruppe -- http://www.kfw.de/EN_Home/ -- deals with the promotion of the development and transformation countries, export and project financing, promotion of middle class, existence founders and start ups, promotion living economy, environmental and climatic protection, education and infrastructure. With 3,900 employees, KFW Bankengruppe has its locations in Berlin, Bonn and Frankfurt am Main. Owned by the federal government and the Laender, it is one of the leading banks in Germany. About IKB Deutsche Headquartered in Dusseldorf, Germany, IKB Deutsche Industriebank AG -- http://www.ikb.de/ -- pioneered the long-term industrial loan and provides medium-sized companies with long-term financing. The bank operates in several German locations, as well as branches in the United Kingdom, Luxembourg, Spain and France. IKB had previously invested in securitized loans on the US market for subprime mortgages, which are now almost worthless. This resulted in a deep-seated crisis within the bank, pushing it on the brink of bankruptcy. * * * As reported in the TCR-Europe on Oct. 4, 2007, Fitch Ratings has downgraded IKB Deutsche Industriebank AG's hybrid debt securities to Long-term 'BB-' from 'A'. They remain on Rating Watch Negative. IKB is rated Long-term Issuer Default 'A+' with Stable Outlook, Short-term IDR 'F1', Support '1' and Individual 'F'. Its subordinated debt issues are rated 'A'. IKB's hybrid capital instruments rated Long-term 'BB-' and on RWN are: -- EUR75 million IKB Funding Trust I's perpetual notes -- EUR400 million Funding Trust II's perpetual notes -- EUR100 million IKB International SA's capital contribution certificates maturing in 2009 -- EUR200 million Hybrid Raising GmbH's perpetual capital notes linked to a silent participation in IKB -- EUR200 million Capital Raising GmbH's perpetual notes linked to a silent participation in IKB -- EUR70 million IKB International SA's capital contribution certificates maturing in 2010 -- EUR150 million Propart Funding Ltd's profit participation certificates maturing in 2015. |
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