Everything must go

10 July 2015 By Olaf Storbeck

In the midst of the Greek crisis, Germany’s government is pursuing a 1.5 bln euro IPO of Deutsche Pfandbriefbank, a remnant of Hypo Real Estate, which collapsed in 2009. While still hobbled by the past, the lender is recovering. A knockdown price takes legacy issues into account.

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German property and public investment lender Deutsche Pfandbriefbank (PBB) on July 7 set the price range for its initial public offering at between 10.75 euros and 12.75 euros, aiming to raise between 1.16 billion euros ($1.27 billion) and 1.37 billion euros in gross proceeds. The bank said the first day of trading was planned for July 16, with book-building planned to end a day earlier.

PBB is owned by nationalised lender Hypo Real Estate (HRE) and is targeting a minimum placement of 75.1 percent of its shares, with the federal government continuing to hold a stake of at least 20 percent for two years after the IPO.

HRE was required to sell PBB by the end of 2015 as a condition of European Commission approval of its state bailout and nationalisation of the lender in the financial crisis.

HRE received a 10 billion euro capital injection as well as 145 billion euros in liquidity guarantees, and has since worked to cut costs and shift unwanted assets into a bad bank.

Of the total bailout money, 1.3 billion euros remains in PBB. One billion euros was paid back on July 6 and Germany’s financial market stabilisation agency FMSA - the government’s ownership vehicle for the lender - is targeting to avoid losses when selling shares in the IPO.

Context News

HRE was required to sell PBB by the end of 2015 as a condition of European Commission approval of its state bailout and nationalisation of the lender in the financial crisis.

HRE received a 10 billion euro capital injection as well as 145 billion euros in liquidity guarantees, and has since worked to cut costs and shift unwanted assets into a bad bank.

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