Seems the Germans are even less willing than we are to make creditors sweat – in fact, they won’t even wipe out the equity:
The German bank-rescue fund, Soffin, bid 1.39 euros ($1.84) a share, or about 290 million euros ($385 million), for the Munich-based lender, it said in a statement today. The government aims to acquire all of the outstanding shares with the offer, which is 16 percent above yesterday’s closing price of 1.20 euros.
Why would the government pay anything for the equity instead of letting the bank fail and seizing it?
“With its public offer and the chosen offer premium Soffin underlines that it wishes to stabilize the financial market using a market-oriented approach if possible and by adhering to existing market practice,” said Hannes Rehm, chairman of the fund.
Hannes, Hannes – there is no market when the company is on life support provided by the German state.
Germany already provided 102 billion euros of credit lines and debt guarantees to sustain Hypo Real Estate after a funding shortage at its Dublin-based Depfa Bank Plc unit brought the company to the brink of bankruptcy.
Pull the credit lines and you can have it for free. It’s not about saving the €300mm of equity purchase price, although you could probably build a pretty nice train station for that amount of money; it’s about the fact that you don’t even have a chance to ding the creditors. There are €252bn of bonds at Hypo (plus another €35bn of repo notes and only €9bn of consumer); every penny you shave is €2.5bn right back to the German taxpayer.
At least the equity holders must be jumping for joy, right? The German government could turn off the lights at will but instead pays greenmail to make its market look good and keep everyone’s fingers pointed squarely at the left side of the Atlantic – how decent of them. Well, Hannes, no good deed goes unpunished:
J.C. Flowers & Co., which leads a group of investors holding 24 percent of the bank, said last week it may take legal action to block nationalization.
