GoldenTree Asset Management LP, the $16.6 billion credit hedge fund founded by Steven Tananbaum, plans to buy a “significant stake” in Austria’s Bawag PSK Bank AG, according to regulatory filings.
GoldenTree, based in New York, notified Austria’s antitrust authority Bundeswettbewerbsbehoerde about its plans on Nov. 16, the BWB said on its website today. About 40 percent of Bawag may be held by GoldenTree, while Cerberus will keep a majority stake, according to three people familiar with the deal who declined to be identified because the talks are private.
Austria’s fourth-biggest bank said on Oct. 19 it’s in talks to bring in new investors to raise “a significant amount” of capital. Cerberus, the private-equity firm led by Stephen Feinberg, said in September it “stands behind” the bank and will support “potential capital actions.”
Sabine Hacker, a Bawag spokeswoman, confirmed “ongoing talks” with investors without elaborating. Peter Duda, a spokesman for Cerberus at Weber Shandwick, didn’t respond to a request for comment. Scott Sunshine, a spokesman for GoldenTree at Water & Wall Group, declined to comment.
Bawag may receive about 200 million euros ($256 million) in fresh funding from GoldenTree, the people said. The purchase also involves swapping bonds issued by the holding companies, they said. The Austria Press Agency reported the structure of the deal earlier today.
Bawag hasn’t produced returns for its shareholders since a Cerberus-led group bought the lender for 3.2 billion euros in 2006. It has to replace 170 million euros of hybrid capital it bought back in March and may need more capital to repay state aid and meet new rules from the Basel Committee on Banking Supervision.
The company was founded as the “Workers’ Bank” in 1922 by Karl Renner, a socialist and Austria’s first chancellor after World War I. The bank, which Cerberus bought from the Austrian trade union federation, lost money each year from 2007 to 2009, causing the New York-based private-equity company to inject 205 million euros into Bawag in 2009, with the Austrian state providing 550 million euros.
The bank, which already had to be rescued by the government in 2006 before the purchase by Cerberus, is now preparing for so-called Basel III rules. More than a quarter of its core reserves consist of capital that will be phased out under these new rules or have to be replaced for other reasons.
Bawag’s core Tier 1 capital ratio, a measure of financial strength, rose to 8.8 percent at the end of June, from 7.8 percent at the end of 2011. That measure includes the non-voting capital the lender received from the government. The state capital costs Bawag 9.3 percent interest annually until 2013 and will get increasingly more expensive starting in 2014.