Nov. 19 (Bloomberg) -- The Netherlands plans to invest an
additional 3 billion euros ($4.5 billion) of cash in ABN Amro
Holding NV’s Dutch unit and Fortis Bank Nederland NV as the
government merges the two bailed out lenders.
In addition, 1.4 billion euros of loans will be converted
into equity, Finance Minister Wouter Bos said today in a letter
to parliament. The additional aid pushes the cost of the bailout
to about 30 billion euros.
The Netherlands bought Fortis’s Dutch banking and insurance
units and its stake in ABN Amro for 16.8 billion euros in 2008
after the company ran out of short-term funding as customers
withdrew deposits and investors lost confidence. As many as
6,500 jobs may be cut by 2012 as the banking businesses are
merged, ABN Amro Chairman Gerrit Zalm said in May.
"By choosing integration, customers and staff have the
prospect of a strong, stable bank with a focus on providing
services to Dutch companies and retail private persons," Bos
said in the letter.
The Dutch parliament in July approved a capital increase
for ABN Amro’s Dutch unit through the sale of 800 million euros
of mandatory convertible notes and a 1.7 billion-euro "capital
relief instrument" to take on the risk of 34.5 billion euros of
Dutch mortgages.
The Netherlands also took over Fortis Bank Nederland’s
stake in ABN Amro for 6.5 billion euros in December, gaining
direct control of the Dutch bank and boosting Fortis Bank
Nederland’s solvency.
Deutsche Bank Deal
The Dutch government agreed to sell some ABN Amro units to
Frankfurt-based Deutsche Bank AG last month to satisfy the
concerns of European Union competition regulators prior to the
merger.
Deutsche Bank will pay 700 million euros, Bos said in the
letter. As part of the deal, ABN Amro will cover 75 percent of
the net losses on a credit portfolio, with the maximum payout
limited to 1.6 billion euros, Bos said. Overall, the government
estimates it will lose about 1.1 billion euros on the
transaction, according to the letter.
The assets, including Hollandsche Bank Unie NV, are the
same ones Deutsche Bank initially agreed to buy from Fortis in
July 2008, Germany’s biggest lender said Oct. 20. The original
709 million-euro deal was scrapped after the Dutch government
bailed out part of Fortis.
The merger, additional investment and asset sale to
Deutsche Bank are subject to parliamentary approval.
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