Charles Barker Corporate Communications GmbH
Holders of Approximately EUR 1 Billion of Listed Tier 1 Instruments ('Investors') Issued Indirectly by HSH Nordbank AG ('HSH') Respond to the Bank's Restructuring Announcement
Thursday, November 8, 2018 10:45 AM
HAMBURG, GERMANY / ACCESSWIRE / November 8, 2018 / On 6 November 2018, HSH announced that it may take certain steps to purportedly streamline and strengthen its regulatory capital base, including via a liability management exercise. While the Investors would generally welcome such an effort by the bank, the same announcement also inappropriately threatened tier 1 holders with "termination" of their instruments and the imposition of what has come to be known as a "double burden scheme." The Investors believe these threats ring-hollow, as the contemplated actions are contractually impermissible, violate German law and are antithetical to the conduct expected of a regulated financial institution.
The Investors believe that the aim of HSH's surprise announcement was to depress the trading prices of the affected tier 1 instruments ahead of a liability management exercise. No rationale was provided by the bank for inexplicably abandoning its recent guidance, upon which investors relied and which implied that the tier 1 instruments would be written up to par by 2023. This raises serious questions about the bank's underlying intention in putting out its most recent release.
The Investors also believe that the bank's announcement may be an improper attempt to deter the Investors from pursuing existing discovery of certain of the bank's buyers in the United States and from filing their planned German lawsuit against the bank by year-end.
The Investors will not be deterred by these heavy-handed tactics.
First, the termination of the four listed tier 1 instruments requires regulatory approval. One of the tier 1 instruments cannot be terminated by the bank until it has first been written-up to par. In any event, a termination of a tier 1 instrument below par by a German bank would be unprecedented, particularly for a bank on the precipice of profitability. HSH forecasts being highly profitable in the near term and it would be incongruous with the proper treatment of regulatory capital providers to make such investors bear only the downside of a bank's performance and then be terminated just as the bank is about to become highly profitable, granting what amounts to an improper gift to HSH's new private equity owners. Moreover, in the planned and already-announced German lawsuit the Investors will seek damages against HSH for many hundreds of millions of euros. If HSH were to terminate the instruments, these would become monetary claims. Claims of such magnitude may significantly impair the bank's regulatory capital and may even endanger the bank's admittance to the BdB deposit scheme. The Investors believe these facts should preclude HSH from seeking and the regulators from granting consent to any termination until the tier 1 instruments are written-up to par.
Second, the use of loss carryforwards to further write down the book value of the tier 1 instruments is an empty threat. It is an absurd gimmick, especially when combined with a termination of the instruments, which would cause the tier 1 instruments to be subordinated to shareholders. The Investors believe such a gimmick violates the terms of the HSH tier 1 instruments and cannot be the intent of any tier 1 capital instrument.
Far from terminating or further writing down the tier 1 instruments, HSH should immediately release enough of its inappropriately inflated statutory reserves (§340g of the German Commercial Code) to fully write-up its tier 1 securities. Not only is this appropriate given the privatization of the bank and the bank's own expectation of being highly profitable going forward, but this would be the appropriate remedy for years of manipulative and improper practices employed to wrongly write-down the tier 1 instruments.
While the Investors will continue to prepare for litigation, they are willing, as they have always been, to engage with the bank and its advisors.
Contact for holders of HSH tier 1 instruments:
Dr. Nadine Herrmann, Partner, Quinn Emanuel Urquhart & Sullivan, LLP
+ 49 40 89728-7000
Charles Barker Corporate Communications GmbH
Tobias Eberle / Thomas Katzensteiner
+49 69 794 090 -24 / -25
SOURCE: HSH Nordbank AG