Cerberus’s Bawag in Talks With New Investors to Raise Fresh Cash
Bawag PSK Bank, the Austrian lender controlled by Cerberus Capital Management LP, is in talks to bring in new investors besides Cerberus to raise “a significant amount” of additional capital, the bank said.
Bawag, Austria’s fourth-biggest lender by assets, said Cerberus would keep a majority stake in the transaction under discussion, Sabine Hacker, a company spokeswoman, said today in an e-mail statement. She declined to elaborate.
GoldenTree Asset Management LP may buy a 33 percent stake in the lender, with Cerberus falling back to 55 percent, Der Standard newspaper reported today, without saying where it got the information.
“Bawag is in discussions with Cerberus Capital Management and other investors regarding the investment by Cerberus of a significant amount of new capital,” Hacker said in the statement. The potential investment “would result in Cerberus maintaining a majority equity position.”
Bawag hasn’t produced returns for its shareholders since a Cerberus-led group bought the lender for 3.2 billion euros ($4.2 billion) 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. Cerberus, the private-equity firm led by Stephen Feinberg, said last month it “stands behind” the bank and will support “potential capital actions.”
John Dillard, a spokesman for Cerberus at Weber Shandwick, didn’t immediately respond to phone and e-mail messages seeking comment on the Standard report. Scott Sunshine, a spokesman for GoldenTree, the $16.6 billion New York-based credit hedge fund founded by Steven Tananbaum, declined to comment.
Bawag 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 an 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 next year, and will get increasingly more expensive starting in 2014.
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