HSH Nordbank AG’s owners are debating plans to transfer about 10 billion euros ($11.3 billion) of bad loans into a separate bad bank in a restructuring aimed at shedding legacy assets and winning European Union approval for state aid, people with knowledge of the proposal said.
In meetings with EU authorities in recent weeks, HSH and its stakeholders proposed moving more than half of the bank’s 15.4 billion euros of non-performing 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. HSH bankers may continue to oversee the sale or winding down of the loans, said the people
While reducing the backstop under the restructuring plan would help HSH shed distressed assets more quickly, it would also mean Hamburg and Schleswig-Holstein having to stump up as much as six billion euros in capital for the bad bank, which would be unpopular with voters, the people familiar with the negotiations said. Whether the plan will meet EU state-aid rules is also unclear, they said.
The states, which are scheduled to hold elections in 2017 and 2020, respectively, must convince the electorate that tackling a revamp now will spare taxpayers an even costlier restructuring at a later date, according to the people. Shifting a portion of the bad loans into a bad bank would also bolster HSH’s rating and refinancing position, Oesterreich said.
Fees to use the guarantee facility are dragging on HSH’s earnings, swelling to 3.2 billion euros since 2009, including 2.4 billion euros in cash payments to the guarantors.