Germany’s HSH Nordbank has received approval from German authorities to receive a €3bn guarantee increase as part of the European Commission’s (EC) state aid procedure.
The troubled bank’s risk shield was re-increased from €7 bn to €10bn in 2013. The EC temporarily approved the €3bn aid that year, but ordered extensive restructuring of the bank before the re-increased guarantee would receive its final approval, which was concluded today.
European commissioner Margrethe Vestager signed off the agreement today with Torsten Albig, minister-president of the German state of Schleswig Holstein, and Olaf Scholz, first mayor of Hamburg.
“This is a positive step which creates the chance for the sale of an important part of the bank and can pave the way for a privatised, viable business to emerge from the sales process,” Vestager said in a statement.
“My services will now take the necessary steps to formalise this agreement in principle in a Commission decision that will be proposed to the College of Commissioners.”
Currently, HSH Nordbank is approximately 85% owned by the state governments of Hamburg and Schleswig-Holstein in northern Germany. The rest is owned by the German savings association and nine trusts held by US private equity investor JC Flowers.
As part of the bank’s restructuring, the EC and German authorities mandated that the bank be split into a holding company and an operating subsidiary. The first will take over most of HSH Nordbank’s guarantee fee payment obligations, and the subsidiary will continue the bank’s current operations and will be privatised through a tender process.
The proceeds from the sell-off of the subsidiary company will be used primarily to satisfy the German states’ guarantee fee claims. The EC says it will assess the company after the sale in a subsequent decision.
“Should the sales process fail, the bank will have to cease new business activities and manage the assets with a view of winding them down,” the Commission said.
In May, the bank announced plans to expand in Asia and open a branch in Busan, South Korea, and signed a memorandum of understanding with the local Busan government and the Export-Import Bank of Korea (Korea Exim).