US private equity firm Lone Star is to take over German lender IKB Deutsche Industriebank, according to KfW, the German firm's biggest shareholder.
State development bank KfW has not given details of its plan to sell its 90.8% stake but one source told Reuters it was worth about 100m euros (£79m).
IKB was one of Europe's first firms to be hit by the US sub-prime crisis.
KfW and other firms intervened to stop IKB from going bankrupt in a rescue package worth several billion euros.
KfW has a 45.5% share in IKB but that is set to increase to 90.8% in an already-agreed deal.
Like other banks, IKB invested in financial products backed by mortgages given to US homeowners with poor credit histories.
IKB faced the threat of bankruptcy as it emerged that it had around $24bn in investments connected to high risk loans.
Once interest rates rose, many borrowers were unable to meet their monthly payments, thereby defaulting on their loans.
More details of the sale are expected to be given at a news conference later on Thursday.
Lone Star - which manages more than $13bn in assets - is reported to have beaten off competition from Swedish bank SEB and fellow US private equity group Ripplewood.
IKB was one of Europe's first firms to be hit by the US sub-prime crisis.
KfW and other firms intervened to stop IKB from going bankrupt in a rescue package worth several billion euros.
KfW has a 45.5% share in IKB but that is set to increase to 90.8% in an already-agreed deal.
Like other banks, IKB invested in financial products backed by mortgages given to US homeowners with poor credit histories.
IKB faced the threat of bankruptcy as it emerged that it had around $24bn in investments connected to high risk loans.
Once interest rates rose, many borrowers were unable to meet their monthly payments, thereby defaulting on their loans.
More details of the sale are expected to be given at a news conference later on Thursday.
Lone Star - which manages more than $13bn in assets - is reported to have beaten off competition from Swedish bank SEB and fellow US private equity group Ripplewood.
Sub-prime crisis to cost IKB $1bn
The warning follows a profit warning issued in July and the resignation of chief executive Stefan Ortseifen.
Before the alert it had forecast annual profits of 280m euros ($382m; £189m). It now expects to lose 600m-700m euros.
Concerns about sub-prime lending to high risk, low income consumers have sparked credit fears across the globe.
In an effort to turn around its fortunes, IKB now plans to restructure itself and focus more on domestic business.
Takeover target
"Innovative financing solutions will remain an integral part of the business model, while investments in international securities portfolios will not," it said.
The new focus of the business has led to speculation that it might become a takeover target.
"If they are only going to do purely domestic lending business, with a big credit book that is not very diversified, then staying independent is not a good idea," said Dirk Becker, analyst at Kepler Securities.
Banks and financial firms around the world, but particularly in Europe, have been heavily investing in this once-lucrative sub-prime sector of the US housing market over the past few years.
But they have suffered as record numbers of US homeowners have defaulted on their mortgages, leaving these investments almost worthless.
The German regional lender Sachsen Landesbank was hastily sold to a bigger state-owned bank when it faced the same problems.
Before the alert it had forecast annual profits of 280m euros ($382m; £189m). It now expects to lose 600m-700m euros.
Concerns about sub-prime lending to high risk, low income consumers have sparked credit fears across the globe.
In an effort to turn around its fortunes, IKB now plans to restructure itself and focus more on domestic business.
Takeover target
"Innovative financing solutions will remain an integral part of the business model, while investments in international securities portfolios will not," it said.
The new focus of the business has led to speculation that it might become a takeover target.
"If they are only going to do purely domestic lending business, with a big credit book that is not very diversified, then staying independent is not a good idea," said Dirk Becker, analyst at Kepler Securities.
Banks and financial firms around the world, but particularly in Europe, have been heavily investing in this once-lucrative sub-prime sector of the US housing market over the past few years.
But they have suffered as record numbers of US homeowners have defaulted on their mortgages, leaving these investments almost worthless.
The German regional lender Sachsen Landesbank was hastily sold to a bigger state-owned bank when it faced the same problems.
Posts
No comments:
Post a Comment