The German Savings Banks Association (DSGV) has come in "at the last minute" with a substantial sum of money for the troubled Nord LB bank
Deutscher Sparkassen- und Griroverband has announced that it will make some €1.2B available as fresh capital. The state of Lower Saxony (NS), as Nord LB’s largest shareholder (60%) has to provide the remaining €2.5B, of which €1.5B in cash. The state of Saxony Anhalt, which owns a 6% stake, is not being asked to provide any funds.
The NS government in Hannover decided to follow the offer of DSGV, as it is the most economical solution for taxpayers. Winding up Nord LB would have been the worst solution with unforeseeable after damages.
The two US investors, Cerberus and Centerbridge, will not be involved. They offered jointly €900M for a 49% stake and asked for further guarantees, but this was not accepted. However Cerberus, already a partner in HSH Nordbank, took over credits for 263 vessels worth €2.7B.
The premier of NS Stefan Weil said that substantial changes will have to be made at the bank, which will become more regional and smaller. Total assets will shrink and staff count will come down.
NS finance minister Reinhold Hilbers expects a workable solution to have been reached with EU and and German supervising authorities by the end of March, although the NS Parliament will have to agree the deal. Ship finance will be discontinued and the core capital reserve must be a minimum of 14% - ie shareholders’ capital must not be less than ca. 14 times the amount of loans.