VIPsight - September 2010

COMPANIES

Companies dispense with ratings

When issuing loans companies are increasingly doing without ratings from the big agencies. In Germany SAP, adidas, Otto, Solarworld, Sixt, Evonik, Celesio and Stada, and most recently also Dürr, are the leaders. Internationally, Christian Dior, Air France, Emirates and Heineken join this list. Doing without a rating saves the groups money and at the same time increasingly takes the ground from under the feet of Standard & Poor’s, Moody’s and Fitch. The DZ Bank estimated the market for ratings-free loans in the first half of this year at already some 10% of all bond issues, with a rising tendency.

Commerzbank soon private again?

“For a Liberal politician there is scarcely anything worse than State involvement in banks. Something like that has to remain an absolute exception,” warned federal economics minister Rainer Brüderle (FDP) in early August in relation to the Commerzbank. To save Germany’s second-biggest financial institution from collapse after the takeover of Dresdner Bank, the State came to the Frankfurt bank’s assistance in early 2009 with €18.2 billion, and since then has held 25% of the bank plus one share. €16.4 billion of the amount are a silent investment, bearing interest of 9%. With his statement, Brüderle sparked off discussion as to when interest on the aid money will run from and how fast the State aid as a whole is to be paid back. In 2009, because of losses, Commerzbank paid no interest to the bank rescue fund. This year the bank will conclude its group result in the blue, and after 2012 possibly start repayments, said management in early August. The criterion for interest payments or repayment of the money is, however, the company result calculated in accordance with the Commercial Code, which might possibly be in the red for the whole year 2010. Brüderle called for the State to have completely withdrawn from the Frankfurt bank by three years at most. Here, however, federal finance minister Wolfgang Schäuble (CDU) links repayments and interest payments to the general financial situation of the institutions involved.

Turbulence at Conergy

In formal terms, the solar group’s creditor banks have extended the loan due at the end of July through the end of 2011. While after three years of losses Conergy had managed to regain the profit zone in the second quarter of this year, its equity capital continues to be dangerously low. To protect the company against possible bankruptcy, the twenty banks involved are currently looking into whether they should convert their loans to equity capital and thus into shares. This might however involve big write-offs that would burden the banks’ balance sheets. Auditors are now to draw up an opinion on the Hamburg group’s business development that can act as a basis for decision. Another destabilizing factor is the reshuffle at the head of the group: ex Infineon CEO and Conergy deputy CEO Andreas von Zitzewitz was really supposed to take over from group CEO Dieter Ammer at the end of October, but in August he resigned with immediate effect. On 1 November, moreover, CFO Jörg Spiekerkötter’s contract expires. Ammer will now for the present extend his appointment.

Bidding race for BHF

16 August was the first closing date for non-binding bids for Deutsche Bank subsidiary BHF. As well as Liechtenstein bank LGT, French BNP Paribas and Swiss private bank Julius Bär, financial investors like Permira, Apollo and Kohlberg Kravis Roberts (KKR) have also apparently displayed an interest, writes Financial Times Deutschland (FTD). All bidders able to present a convincing concept are now to be given a closer look at the BHF figures. When it bought Cologne private bank Sal. Oppenheim last year, Deutsche Bank had also taken over the BHF bank, but wants to get rid of it. Since the BHF bank’s business focus is on risky capital-market transactions, the Federal Financial Services Oversight Panel (BaFin) will look closely at ensuring that the institution is taken over by a purchaser with a strong rating. As a purchase price €600 million has been mentioned.

Mortgage insurers against Deutsche Bank

The on-line magazine Der Aktionär reports that Deutsche Bank may possibly be facing a major lawsuit. US mortgage insurers such as MBIA, eleven syndicated banks and several issuers of mortgage-guaranteed securities wish to sue for wrong or misleading information on real-estate values. A study by Compass Point Research and Trading LLC estimates the possible total claims at $134 billion. The accusations are however not new, and the likelihood that the losses really are of the size mentioned is rather small, says the magazine.

MAN’s new compliance system

A year after the corruption scandal at car and engine manufacturer MAN SE, the second-biggest bribery case in German postwar history after Siemens, the new compliance system is taking shape. Currently the team around the anti-corruption officer appointed at the start of the year, Olaf Schneider, numbers 25. By the year’s end there are to be 44. Schneider is relying on the employees’ own responsibility: they are allowed to spend up to €100 on a meal and receive gifts to a value of €50.

Hapag-Lloyd considers refinancing

Even a year ago things looked extremely gloomy for the world’s sixth-biggest shipping firm, Hapag Lloyd. To escape bankruptcy, the subsidiary of tourism group TUI had even asked for a State guarantee. Now the Hamburg company, in which TUI still has a 43.3% share, with the other shares being held by the Albert-Balim-Konsortium, is brightening up the balance sheet of its parent in Hanover. Between April and June Hapag Lloyd had earnings before interest, taxes, depreciation and amortization (EBITDA) of €226.2 million, thus bringing TUI’s profit for the third quarter to €105 million, making profit for the whole year possible. This comfortable economic position is now sufficient occasion for the Hapag management to discuss giving back the State guarantee and proceeding with the necessary refinancing. As long as the State guarantee is present no dividends can be paid out and claims will be deferred. The refinancing that has now become possible is to be insured by a loan of at least €500 million, associated with a higher credit envelope. The shipping firm still has debts of €600 million with its parent TUI, and at the end of June it had commitments of €1.2 billion to banks.

Wiedeking’s disclosure was correct

Next year the merger of the two carmakers Volkswagen (VW) and Porsche is to be completed. However, in the runup to the merger both partners are to be subjected to assessment. This might increase VW’s weight, which might also have effects on the proportion of shares in the new group. In the meantime, along with DWS supervisory-board member Christian Strenger, Deka Bank and the Scandinavian pension fund Norges Bank had submitted an application for a special audit to Stuttgart Regional Court in early August. After Strenger’s motion to this effect failed at the Porsche AGM, the member of the Government Commission on the German Corporate Governance Code wishes in this way to have both the option transactions in the planned takeover of Volkswagen by Porsche and the severance payments of €62.5 million to ex Porsche CEO Wendelin Wiedeking and ex CFO Holger Härter declared illicit. Investigation of both by Stuttgart public prosecutors for breach of disclosure obligations has been discontinued.

Springer in the MDAX

From 20 September the Axel Springer AG share will be listed in the MDAX, displacing civil-engineering specialist Bauer, which slips down into the SDAX. Network equipment supplier Adva Optical moves into the TECDAX, while biotech company Medigene leaves the technology segment. The DAX remains unchanged. The next review of index composition is on 3 December.