HSH Nordbank needed E13 billion
Yet another bank has been bailed out by it’s respective government. This time, HSH Nordbank in Germany.
HSH Nordbank, which specializes in financing the shipbuilding industry, had posted a pre-tax loss of €2.8 billion in 2008 as a result of the global financial crisis. If the institute had not received state aid, it would have been closed down by the German financial services regulatory authority BaFin. The troubled HSH Nordbank is to receive a capital injection of €3 billion ($3.8 billion) from the state of Schleswig-Holstein and the city-state of Hamburg under a deal announced Tuesday by Schleswig-Holstein Governor Peter Harry Carstensen and Hamburg Mayor Ole von Beust. The bank will also receive a state-backed credit guarantee worth €10 billion.
“We had to act in this way,” explained Schleswig-Holstein Governor Carstensen, saying that there was no alternative as it was impossible to find a partner or buyer for the bank.
The states were forced to intervene after the Soffin fund, which was set up by the federal government last year to stabilize the financial markets, said it could not help out HSH Nordbank until it got rid of all its bad debts. Carstensen said that Soffin may still help the bank out in the future, however.
But the €3 billion injection is unlikely to be enough to save the bank, with the shipping industry currently in the toilet, and the sales of luxury yachts drying up faster than an ice cream on the beach at St Tropez. The word on the French Riviera (home to many of the most expensive yachts in the world) is that most of the Russian owners have simply stopped paying their bills, and the only new builds likely to be completed in the next two years are those that are almost finished anyway. Wolfgang Kubicki, floor leader for the business-friendly Free Democratic Party in the Schleswig-Holstein state assembly, told Reuters Tuesday that HSH may need up to €9 billion in fresh capital over the next four to five years.
The plan is, as usual, to spin off it’s bad assets into a “bad bank,” to allow them to function. This one cames shortly after the German government hastily re-wrote their laws to allow them to seize Hypo Real Estate, another German bank in dire straits. What might this have to do with luxury property? you might ask. Luxury property markets are inexorably connected to the health of the financial insitutions, and we still seem nowhere near discovering the extent of the bank’s losses. It is easy to think that the current financial issues are local, but this disease has spread around the world.
