Pfandbriefbank IPO

Listing a Lehman Victim

PBB dpa
It's time to fly for Pfandbriefbank.
  • Why it matters

    Why it matters

    Germany still has not cleaned up all the victims of the 2008 credit crisis, and could still incur further losses.

  • Facts

    Facts

    • Germany bailed out property lender Hypo Real Estate in 2008, and created a viable part called Pfandbriefbank with assets worth €75 billion or $83 billion.
    • Pfandbriefbank funds commercial real estate and public investment projects.
    • Germany plans to sell up to 80 percent of Pfandbriefbank shares between €10.75 to €12.75 per share, raising up to €1.38 billion and valuing the bank at up to €1.72 billion.
  • Audio

    Audio

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Germany is pressing ahead with the initial public offering of Deutsche Pfandbriefbank, or PBB, a real estate and public investment lender which is part of bailed out Hypo Real Estate group.

“Despite Greece and other issues, the current market environment is relatively stable,” Pfandbriefbank co-chief executive Andreas Arndt was quoted as saying by Reuters on Wednesday, when the bank announced details of the listing.

Some German companies, including fashion trader CBR and real estate firm Ado Properties have postponed plans to list due to the falling stock markets, especially in China, increased price volatility and uncertainty due to the possible exit of Greece from the euro zone.

The listing of Pfandbriefbank could raise up to €1.38 billion, valuing it at up to €1.72 billion.

Others, like wind-and-solar park operator Chros Clean Energy and German Startups Group Berlin, an investment firm which funds Internet companies, are pushing ahead with their listings later this month.

Hypo Real Estate was one of Germany’s biggest victims of the post-Lehman banking crash that hit the United States and Europe in 2008 and 2009, receiving around €5 billion in government capital in 2008 and temporarily supported with more than €100 billion in liquidity guarantees.

Germany has had to swallow €9.3 billion in losses due to the Hypo Real Estate bail-out. At one point, the nationalized lender owned more Greek debt than all of the other German banks together. When Greek debt was written down in 2012, it costs the German tax payer €8.9 billion.

To close part of the costly chapter, the listing of Pfandbriefbank, which had €75 billion or $83 billion worth of assets at the end of March, could raise up to €1.38 billion, valuing it at up to €1.72 billion.

If the listing takes place next Thursday as planned, it would be the biggest IPO in Germany this year.

 

192 PBB Deutsche Pfandbriefbank WTB resume

 

Germany will still own the so-called “bad bank” operations of Hypo Real Estate – assets and securities which cannot be sold and are being wound down over time. Germany will also keep 20 to 25 percent of Pfandbriefbank shares for the next two years.

An important reason for pressing ahead with Pfandbriefbank’s listing is a requirement by the European Commission. The commission approved the bailout at the time but demanded privatization of Pfandbriefbank by the end of 2015. A couple of weeks ago, the institution decided against an outright sale and opted for a stock market listing. Proceeds will be used to pay off, in part, the Financial Market Stabilization Fund, Germany’s bank bailout fund.

The push to list Pfandbriefbank was made easier because of positive responses in discussions with major investors, people familiar with the matter told Handelsblatt.

In uncertain times, these sources said, there is always demand for low-risk stocks in companies with a steadily developing business and good dividend returns, which is one of the strengths of Pfandbriefbank.

The company plans to announce that 40 to 50 percent of consolidated net profits will be paid to stockholders, according to sources close to the matter. A pro rata dividend is already planned for the current year.

 

Robert Landgraf is the deputy head of Handelsblatt’s finance section and is based in Frankfurt. Kerstin Leitel covers banks and insurance companies. Gilbert Kreijger is an editor with Handelsblatt Global Edition, covering companies and markets. To contact the authors: landgraf@handelsblatt.comleitel@handelsblatt.com and kreijger@handelsblatt.com

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