HSH Nordbank postponed any decision regarding the loss participation of its hybrid instruments to the first quarter of 2019, when the 2018 accounts will be released, management said during today’s earnings call with investors. Management offered “no comment” to a series of analysts’ questions of a possible liability management exercise, or LME, or “IKB-sation” of HSH hybrid bonds, and added that no further clarity can be provided as the bank is still waiting for the finalization of its privatization process, which is expected between the second and the third quarter of 2018.
Management reiterated that it will be possible to pay interests on the securities at the earliest from the 2024 financial year for the 2023 financial year, and not from the 2020 financial year for the 2019 financial year as originally anticipated.
the notes face two main scenarios - either an LME, possibly based on the bonds’ trading value before the bank’s sale, or an “IKB-sation” of HSH Nordbank. In fact, according to a research piece by JPMorgan, the new sponsors will have all the incentives to extract the maximum value out of tier 1 bonds through “losses carried forward,” which would allow for a large portion of the losses to accrue to bondholders while preserving HSH’s capital position and therefore its viability as a lender.