JC Flowers, a financial services specialist buyout firm, will inject €300 million ($472.3 million) and a further undisclosed amount into HSH Nordbank, a German Landesbank, as part of the financial institution’s attempt to strengthen its balance sheet.
The other three shareholders in the bank the City of Hamburg, the State of Schleswig-Holstein, and the Savings Banks Association of Schleswig-Holstein have converted “silent partnerships” worth €685 million and preferred shares amounting to €57 million to common stock, a spokesman said. JC Flowers’ €300 million injection will stop dilution of its 26.1 percent stake in the bank, acquired in 2006 from West LB, another German bank.
The bank will also receive an injection of €962 million from the four shareholders. The investors will receive “mandatory convertibles”, which will be converted into shares no later than 31 December, 2010, or should the bank be listed on a stock market. It was not revealed the amount each investor had taken of the mandatory convertibles.
The funds will be used to provide the bank with financing as it continues to look towards an initial public offering, the spokesman said. “We wanted to have an initial public offering last year but we postponed it because of market conditions.”
The bank had write-downs of €1.3 billion in 2007 and further write-downs of €230 million in the first quarter of 2008. It has started legal action against UBS relating to the alleged mismanagement by the Swiss bank of a $500 million (€317.8 million) portfolio of collateralised debt obligations.