Germany unveils first full bank nationalisation

AFP on Yahoo ^ | 4/11/09 | William Ickes

[NormsRevenge]

FRANKFURT (AFP) – Germany on Thursday launched its first full bank nationalisation since the republic's birth in 1949, with a key US investor set to pay a high price as officials try to stabilise financial markets.

The government, acting through the Financial Markets Stabilisation Fund (SoFFin), said it would offer shareholders in troubled Hypo Real Estate 1.39 euros per share for their stock.

That price means the state, which already holds 8.7 percent of the bank, will have to pay about 290 million euros (385 million dollars) to buy out other shareholders.

Investors will have two weeks to tender their shares once the offer is approved by the stock market regulator Bafin.

Analysts recommended the bid but Christopher Flowers, an American who heads a consortium that owns almost 24 percent of the bank, played his cards close to his chest.

"The preference of JC Flowers is still to stay in the capital of the bank," a spokesman told AFP, before adding: "However, Mr. Flowers will study the offer."

Flowers paid 1.1 billion euros for the holding or 22.50 euros per share.

A SoFFin statement said the offer price "represents a premium of approximately 10 percent to the statutory minimum offer price of 1.26 euros."

HRE shares jumped 12.2 percent to 1.38 euros in midday Frankfurt trade, while the MDAX index on which they are listed showed a gain of 3.18 percent overall.

SoFFin chairman Hannes Rehm said the body "wishes to stabilise the financial market using a market-oriented approach if possible and by adhering to existing market practice."

[NormsRevenge]

JC Flowers, former Goldman Sachs partner.

[papasmurf]

In that my wife is an ALF (Alien Life Form-Germany), and has a pension due from a well known German bank, I have a vested interest in the matter.

Some background on the SonFFin...

The Fund may grant guarantees in an amount up to 400 billion Euros. In case a guarantee is enforced the Federal Ministry of Finance can take out credits in an amount up to 20 billion Euros as coverage.

The Federal Ministry of Finance can take out credits in an amount of up to 70 billion Euros to provide recapitalisation measures and to assume risk positions. With the consent of the budget committee of the German Parliament this credit amount can be extended by up to another 10 billion Euros.

In case the Federal Republic of Germany takes out loans for the Fund, its net borrowing and debt level will increase. However, as the Fund can acquire participations in financial sector enterprises and receives fees as consideration for granted guarantees, the negative effects for the public budget should be limited. In addition, the Fund generates administrative costs. These costs are borne by the Federal Republic of Germany.



SOURCE (in English)

It's rumored that Germany already has plans to tap the IMF fund that 0bama just promised a Trillion dollars to. If that does happen, and those funds end up going to the bank, she will suffer a steep reduction in financial benefits.