July 1 (Bloomberg) -- WestLB AG’s planned overhaul narrowly avoided collapse after the regional government in its home state of North Rhine-Westphalia was forced to amend the restructuring plan to secure the support of parliament.
North Rhine-Westphalia, which partly owns WestLB, needed to approve the proposal to meet a deadline for it to be handed over to the European Commission by midnight last night to get approval for aid received during the financial crisis.
The overhaul hung in the balance yesterday after Chancellor Angela Merkel’s Christian Democratic Union, in opposition in the state, voted against it. The plan won majority backing after it was “modified slightly” and brought again before the state assembly in Dusseldorf, according to Markus Weske, a spokesman for the ruling Social Democratic Party. The Christian Democrats then reversed their opposition and voted in favor.
The restructuring plan foresees that business related to savings banks, which includes a lending unit that serves medium-size companies and has a balance sheet of 40 billion euros ($58 billion) to 45 billion euros, will be transferred to a new credit institution on June 30 next year, WestLB said June 24 in a statement. The so-called Verbundbank will have about 400 employees.
Operations not sold by June 30, 2012, will be transferred to WestLB’s bad bank. North Rhine-Westphalia will take on the ownership responsibility for the rest of the bank, while the savings bank associations, which hold about 50 percent of the lender, will cease to be shareholders.
The program, which includes additional financial support to split the state-owned lender, was approved by other shareholders and German authorities earlier this month.
WestLB’s owners, which include regional savings associations of the Westphalia-Lippe and Rhineland, reached an agreement on June 24 with the Federal Agency for Financial Market Stabilization, the lender and its bad bank, Erste Abwicklungsanstalt, on the restructuring plan. As part of the overhaul, the state of North Rhine-Westphalia was slated to provide 1 billion euros in financial support.
WestLB, which also provides structured and real-estate finance, was bailed out by its owners and Germany’s Soffin rescue fund after running up losses during the financial crisis.
To contact the reporters on this story: Aaron Kirchfeld in Frankfurt at email@example.com