HSH Bank to pro­pose $11b 'bad bank' plan to EU

The Pak Banker - - COMPANIES/BOSS -

HSH Nord­bank AG's own­ers are de­bat­ing plans to trans­fer more than half of the Ger­man ship­ping len­der's 16 bil­lion eu­ros ($18 bil­lion) of bad loans into a sep­a­rate bad bank in an ef­fort to win Euro­pean Union state- aid ap­proval, peo­ple with knowl­edge of the plans said.

In meet­ings with the EU in re­cent weeks, HSH and its own­ers pro­posed mov­ing about 10 bil­lion eu­ros of loans into a spe­cial pur­pose ve­hi­cle con­trolled by HSH Fi­nanz­fonds, a public agency that man­ages most of the shares held by the Ger­man states that con­trol the len­der, said the peo­ple, who asked not to be iden­ti­fied be­cause the talks are pri­vate. HSH bankers may con­tinue to over­see the sale or wind­ing down of the loans, the peo­ple said.

The north­ern states of Ham­burg and Sch­leswig-Hol­stein, which jointly hold 85.4 per­cent of HSH, are still strug­gling to reach a fi­nal de­ci­sion on op­tions to purge the Ger­man ship­ping len­der's books of bad loans, as fees to use state guar­an­tees swell, erod­ing earn­ings. Ham­burg and Sch­leswigHol­stein in 2009 supplied 3 bil­lion eu­ros of cap­i­tal and granted a 10 bil­lion-euro guar­an­tee to cover losses stem­ming from risky in­vest­ment-bank- ing deals and non-per­form­ing ship­ping loans. The bank still held 15.9 bil­lion eu­ros in bad loans, ac­count­ing for 23 per­cent of its to­tal credit book, ac­cord­ing to a com­pany pre­sen­ta­tion in May. More than 90 per­cent of those ail­ing ship­ping and real es­tate loans were cov­ered by the guar­an­tee.

The EU ap­proved the guar­an­tee on a pre­lim­i­nary ba­sis un­der state-aid pro­ceed­ings in June 2013. Since then the EU, HSH and its state-own­ers have held reg­u­lar dis­cus­sions on the res­cue pack­age, which haven't been com­pleted, Daniel Stricker, Ham­burg fi­nance min­istry spokesman, said by phone on Thurs­day.

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