HSH Nordbank Wins Formal EU Approval to Pave Way for Sale

  • EU decision formalizes October agreement with Germany
  • Bank to be sold after distressed loans unloaded to bad bank

HSH Nordbank AG won formal European Union approval for an increased state guarantee, paving the way for its sale after it unloads distressed shipping loans to a bad bank.

The European Commission said the bank will be wound down if it can’t be sold as a viable business that doesn’t require further government help, according to an e-mailed statement. The ruling formalizes an October agreement with Germany and ends the EU’s 2013 probe into the raising of its guarantee ceiling by its government owners, Hamburg and Schleswig-Holstein, from 7 billion euros ($8 billion) to 10 billion euros.

EU regulators must approve rescue aid for banks to ensure they don’t receive an unfair advantage not given to rivals. They have ordered banks across Europe to restructure their businesses, and in rare cases to close down, following government rescues.

HSH Nordbank can sell as much as 6.2 billion euros of bad loans to the two German states at market value and another 2 billion euros to the market under the EU decision. The price will be set through an independent value assessment, the EU said.

The operating part of the business will then be sold by tender. Regulators will monitor the sale and may order the bank to be wound-down if they think the bank won’t function without state aid post-sale. While the EU didn’t mention the deadline for the sale, HSH said it must be done by Feb. 28, 2018 plus a six months grace period.

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