HSH targeted by US distressed debt investors
A group of US hedge funds is discussing plans to persuade German public sector bank HSH Nordbank to restructure its debt as European stress tests raise concerns about the continent’s weakest lenders.
The distressed debt investors include at least two US hedge funds that were involved in the restructuring of the UK’s Co-operative Bank, according to people familiar with the situation.
Investors in the unlisted Landesbank’s debt have been alarmed by speculation from analysts and media reports in recent days that HSH could suffer in the stress tests, the results of which will be published on Sunday.
Investors approached HSH earlier this summer but their offer to swap their tier one debt with so-called cocos, or contingent capital bonds, at a discount to help strengthen the lender’s capital base has so far not been taken up by the bank.
One investor said that if the results of the European Central Bank’s stress tests this weekend were negative, the group would look at formalising its approach as early as next week. He said the investors would continue to press their case even if HSH passes the stress tests.
HSH’s shipping portfolio has come under particular scrutiny in the ECB probes, with executives braced for an order to write down the value of the €20bn in shipping assets by as much as 20 per cent this weekend.
Analysts have put the bank on their watch list as one of the most likely lenders to fail the stress tests this weekend, although others believe that HSH’s state guarantee will help to cushion any blow. The bank declined to comment on speculation ahead of the results on Sunday.
Source: FT- HSH targeted by US distressed debt investors
