Troubled Dutch bank SNS looking at share issue
|By TOBY STERLING, AP Business Writer|
The company, which has about 10 percent of the Dutch retail bank market and had total assets of (EURO)134 billion (
Analysts reckon that SNS needs roughly (EURO)2 billion in capital to regain solvency. The company has been warning since July that it needed to restructure its capital, and that shareholders and bond investors could be involved. The group's stock lost about a third of its value last week on rumors that it would have to be nationalized outright.
On Monday SNS gave more insight into what it sees as likely options.
<p>The company added that this could involve "a major share issue" and forcing the holders of the company's subordinated debt _ bonds that are ranked below other debt in terms of claims on assets _ to accept shares in the company rather than being repaid, a so-called "bail-in."
SNS added that it wasn't clear that plan is feasible.
Dutch media had speculated that senior bondholders might be asked to take losses _ a plan that is appealing to many who feel bank investors, rather than taxpayers, should be forced to take losses as part of a bank rescue. However, U.S. rating agency Fitch warned last week that if the Dutch government were to impose losses on senior SNS bondholders _ even though it is a tiny player in the European market _ the move would affect its view of the safety of bonds of all European banks across the board.
That would lead to higher borrowing rates for banks, higher interest rates for other borrowers, and potentially spark a new financial and banking crisis _ not an outcome that European policymakers are looking for at the moment.
On Monday shares in SNS recovered 2.3 percent to (EURO)0.798 on hopes shareholders won't be totally wiped out, giving it a market capitalization of (EURO)229 million. That's against a book value of (EURO)4.8 billion in September.
The company has been trying to sell off assets, but so far that has proved difficult.
Dutch media have reported foreign investors have shown interest in parts of SNS, but either they weren't willing to pay a price that would help SNS's solvency, or they were not investors the Dutch state believed were interested in SNS's long-term viability.
The nationalization option feared by shareholders also carries some political difficulties for the Dutch government, which is trying to insure it remains within the 3 percent budget deficit limit mandated by European rules.
"We're looking for the maximum possible "bail-in," because we feel that the risks should rest" with investors, Finance Minister
He emphasized he was speaking about the Dutch stance toward European bank bailouts in general, and declined to answer specific questions about SNS, since he is involved in the negotiations. But he confirmed current Dutch law could be applied to SNS bondholders.
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