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February 29, 2008 |
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IKB DEUTSCHE: European Commission Probes Germany’s Measures The European Commission has commenced a probe into whether the German government's financial measures to IKB Deutsche Industriebank AG constitutes violation of European Union competition laws, Bloomberg News reports. "The commission has to ensure that such interventions do not unduly distort trade in the markets," Competition Commissioner Neelie Kroes was quoted by Bloomberg News as saying. "[The commission] has to assess whether these measures constitute state aid and, if so, whether they can be found compatible with EU rules for rescuing and restructuring firms in difficulties." 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. As previously reported in the TC-Europe, the German government has decided to infuse EUR1.5 billion in fresh capital into IKB, pledging to provide EUR1 billion of the rescue fund, while the local banking industry will furnish EUR500 million. 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. Mr. Kroes noted that IKB "would not have been able to continue their business without the measures." Meanwhile, Finance Ministry spokeswoman Ulrike Abratis told Bloomberg News that the government assumed that the financial measures doesn't qualify as state aid. Ms. Abratis said the government will work closely with the commission and provide all required documents.. 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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