Cerberus’s Austrian Lender Bawag Said to Explore IPORuth David, Elisa Martinuzzi and Boris Groendahl
Bawag PSK Bank AG, the Austrian lender owned by Cerberus Capital Management LP and GoldenTree Asset Management LP, is discussing an initial public offering with banking advisers, people with knowledge of the situation said.
Shareholders are exploring exit options for Austria’s fourth-biggest bank more than seven years after New York-based Cerberus bought it, said the people, who asked not to be identified because the discussions are private. The Vienna-based lender has a book value of about 2.4 billion euros ($3.3 billion), according to its 2013 annual report. No adviser has been hired and no final decision made on an IPO or whether to sell the bank, the people said.
Cerberus agreed to buy Bawag for 2.6 billion euros from Austria’s trade union federation in 2006 after a financial scandal almost brought the bank down. It still holds 52 percent of the bank after GoldenTree acquired 39 percent for an undisclosed amount in 2012. A group of investors including Oesterreichische Post AG, Assicurazioni Generali SpA and Wuestenrot Wohnungswirtschaft owns the balance.
Sabine Hacker, a Bawag spokeswoman, said discussion of hiring advisers is “pure speculation” and that Bawag’s management is focused on executing its goals for 2014. Representatives of Cerberus and GoldenTree declined to comment.
Bawag hasn’t been profitable for Cerberus. The investor injected 600 million euros into Bawag in 2007 and another 205 million euros two years later, after a structured credit portfolio contributed to a 548 million-euro loss following the collapse of Lehman Brothers Holdings Inc. Bawag also received 550 million euros of Austrian state aid in 2009.
Part of GoldenTree’s stake purchase was a 200 million-euro capital injection by Cerberus and GoldenTree in December 2012, and the duo topped this up with 125 million euros this year, when Bawag repaid the rest of the Austrian state aid. Meanwhile, the bank hasn’t paid dividends on its share capital since Cerberus bought it, according to its annual reports.
Chief Executive Officer Byron Haynes said on March 13 that Bawag’s shareholders, as financial investors, “will exit at some point,” adding that there’s currently no sales process.
The bank, which had 36.4 billion euros of assets at the end of last year, has been profitable again since 2010, and more than doubled net income to 229 million euros in 2013. Its management is speeding up cost and job cuts this year to keep return on equity above 10 percent while bolstering capital.
Among the major risks for the bank is a pending court battle with the Austrian city of Linz over a Swiss franc swap deal that went sour. Bawag wants Linz pay 418 million euros plus interest while the city considers the deal as invalid.