Cerberus Supports ‘Potential Capital Actions’ at Bawag
Cerberus Capital Management LP, the U.S. private-equity firm led by Stephen Feinberg, will support “potential capital actions” at Bawag PSK Bank AG, the Austrian lender it acquired in 2006.
“Cerberus Capital Management stands behind and continues to support its investment in Bawag PSK, including potential capital actions which will enable Bawag to execute successfully its strategic business plan,” the New York City-based firm said in an e-mailed statement today.
Bawag, Austria’s fourth-biggest lender, was bought by a Cerberus-led group for 3.2 billion euros ($4.1 billion) in 2006 and hasn’t produced returns for its shareholders since. The bank lost money each year from 2007 to 2009, causing Cerberus to inject 205 million euros into Bawag in 2009, with Austria providing an additional 550 million euros of state aid. Under the aid deal, Bawag isn’t allowed to pay dividends to the equity holders until this year, and dividends are restricted thereafter until the state is repaid.
The lender, which already had to be rescued by the government in 2006 before the purchase by Cerberus, is now preparing for new capital rules proposed by the Basel Committee for Banking Supervision. More than a quarter of its core reserves consist of capital that will be phased out under the Basel III rules or have to be replaced for other reasons.
Bawag’s core tier 1 capital ratio rose to 8.8 percent at the end of June, from 7.8 percent a year earlier. That measure includes the non-voting capital the lender received from the government. The state capital costs Bawag 9.3 percent interest annually until next year, and will get increasingly more expensive starting in 2014.
The bank’s capital also includes hybrid securities no longer recognized as loss-absorbing under Basel III. Bawag bought back two-thirds of those securities in March and has said it will have to replace them with new capital.
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