HSH Nordbank Owner Signals End to State-Aid Talks This Month

  • Discussions on state guarantee have gone on for two years
  • Schleswig-Holstein opposition says bad bank plans violate law

HSH Nordbank AG’s co-owner Schleswig-Holstein said it will hold negotiations with the European Union on a 10 billion-euro ($11.3 billion) state guarantee for the German shipping lender over the next several days, indicating that more than two years of discussions may come to a conclusion this month.

“The state government will use the coming days to hold the necessary, additional talks,” Monika Heinold, the state’s finance minister, said in the Schleswig-Holstein regional parliament in Kiel on Wednesday. The city of Hamburg, HSH’s other state-owner, the Bundesbank, banking regulator Bafin and the Federal Finance Ministry as well as the European Central Bank will also take part, she said.

HSH and its stakeholders, who are negotiating the terms of a restructuring to gain final approval for the guarantees from the EU, have proposed moving at least two-thirds of the bank’s 15.4 billion euros of non-performing loans into a bad bank controlled by its owners, people familiar with the matter said last month.

Like other German state-owned banks known as Landesbanken, Hamburg-based HSH used government guarantees to go on a lending binge that soured after the 2008 financial crisis. The legacy is hampering a turnaround as the maritime industry goes through an extended slump.

Heinold on Wednesday was responding to questions by Free Democratic lawmaker Wolfgang Kubicki, who asked her to comment on HSH’s August request to its state owners to take over the legacy assets as a way to ensure the bank’s long-term viability.

“We are in ongoing contacts on a technical level with the German authorities,” a European Commission spokeswoman said by phone, declining to give a timeframe.

Kubicki, who is a member of the opposition in Schleswig-Holstein’s parliament, said that creating a government-controlled bad bank for HSH’s legacy assets would not be line with state law.

Should Schleswig-Holstein “buy the assets at market prices, it will violate the state’s budget law,” he said. “It is prohibited for the state to take part in speculative deals, directly or indirectly.”

The state’s finance ministry wasn’t immediately available to comment.

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