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February 15, 2008 |
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IKB DEUSTCHE: German Government Pioneers EUR1.5 Billion Bail-Out The German government has decided to infuse EUR1.5 billion in fresh capital into IKB Deutsche Industriebank AG, various reports say, citing government officials. According to Thomson Financial, Finance Minister Peer Steinbrueck said the government pledged to provide EUR1 billion of the rescue fund, while the local banking industry will furnish EUR500 million. "An insolvency of IKB would have had unforeseeable consequences on the German financial market," Mr. Steinbrueck was quoted by the Financial Times as saying. Mr. Steinbrueck, however, said Germany will not provide "unlimited support" to IKB. "We have agreed to do everything to ensure that IKB can stay in business," Economy Minister Michael Glos was quoted by Bloomberg News as saying. "Part of the agreement is an appeal to banks to make their own contribution to help create the preconditions which would enable us to keep IKB alive." "There have been talks with third parties," Thomas Steg, spokesman for Chancellor Angela Merkel, was quoted by Bloomberg as saying. As reported in the TCR-Europe on Feb. 14, 2008, State-owned KfW Bankengruppe may issue a convertible bond on its 31% stake in Deutsche Post World Net AG to raise EUR1 billion in fresh funds for capital-depleted IKB, in which KfW holds a 37.8% stake. IKB is reportedly needing up to EUR2 billion in fresh capital, EUR500 million of which is needed in the short term. KfW may have to bail out IKB for the third time after the bank's other shareholders refused to finance the company's restructuring. KfW had agreed in July 2007 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. In December 2007, a KfW-led banking pool agreed to cover US$520 million in risks for IKB, which brought the cost of the rescue to EUR6.15 billion. IKB had notified Bundesbank and BaFin that it could face more liquidity problems if it fails to secure necessary financing. IKB warned in September 2007 that it may post EUR700 million in losses for fiscal year ending March 31, 2008. 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 Jan. 25, 2008, Moody's Investors Service downgraded the bank financial strength rating of IKB Deutsche Industriebank to E+ from D-. The outlook on the BFSR is now developing. As reported in the TCR-Europe on Jan. 9, 2008, Fitch Ratings has upgraded IKB Deutsche Industriebank AG's Individual rating to 'E' from 'F'. The TCR-Europe also reported on Dec. 13, 2007, that Fitch Ratings downgraded the loan facilities provided by IKB Deutsche Industriebank AG and IKB International S.A. to Havenrock II Limited as: -- US$165,000,000 loan provided by IKB International: downgraded to 'CC/DR2' from 'BBB+' Outlook Negative; -- US$404,875,000 Facility C loan provided by IKB: downgraded to 'CC/DR2' from 'BBB+'; Outlook Negative; -- US$43,750,000 Facility B loan provided by IKB: downgraded to 'CC/DR2' from 'B+'; Outlook Negative; and -- US$11,375,000 Facility A loan provided by IKB: downgraded to 'CC/DR2' from 'CCC'; Outlook Negative. |
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