DealZone

Haider’s heirs disown troubled Hypo bank

When the late Joerg Haider, the hard-right populist governor of the southern Austrian state of Carinthia, sold most of his government’s stake in Hypo Group Alpe Adria in 2007, he said, beaming: “Ladies and Gentlemen, Carinthia is rich.”

BayernLB, which like many other German landesbanken appears to have never met a toxic asset it didn’t like, had just paid 1.65 billion euros for a 50 percent stake in Hypo. Around half of that went into Haider’s government’s coffers.

Haider/Porsche

True to his pork-barrel politics, Haider used the funds to, among other things, subsidise Carinthian teenagers’ driving licence fees, scrap kindergarten fees, and pay out cash to Carinthian families to “offset inflation” in 2008, conveniently timed shortly before an election.

This worked to cement Haider’s image as the generous leader looking after the man on the street. But since his death in a car crash last year, it shows that the basis of this policy was not sustainable. Hypo is now in urgent need of another year-end emergency capital injection of more than 1 billion euros, after it went cap in hand to the Austrian government and BayernLB for 1.6 billion euros last year already.

Hypo’s breakneck expansion in the former Yugoslavia is the main reason for its continued losses this year. Haider and his confidante, ex-CEO Wolfgang Kulterer, started and presided over this expansion, which let Hypo’s balance sheet balloon to more than four times what it was in 2002. (This is the same Kulterer who pleaded guilty last year of false accounting during his time as Hypo CEO.)Hypo HQ

from Summit Notebook:

Thain says put shareholders first

John Thain says he put shareholders first and his interests second in deciding to sell Merrill Lynch to Bank of America.

Thain, speaking at the Reuters Global Finance Summit in New York, said a deal to sell a partial stake in Merrill Lynch to Goldman Sachs would have been better for him, but the sale of the entire Wall Street firm to Bank of America was the best outcome for shareholders.

Over a fateful weekend in September 2008, as Lehman hurtled toward bankruptcy, AIG floundered and the financial system looked into the abyss, Merrill held discussions with Bank of America, Goldman Sachs and Morgan Stanley for various transactions, Thain said.

Should banks or regulators come up with “living wills”?

USBROKERS/RESEARCH-CITIGROUP The idea that financial firms whose collapse could create trigger broad economic problems should come up with their own living wills has been gaining traction lately.

After the confused attempt to bailout or save Lehman Brothers, Bear Stearns and AIG in 2008, some regulators have been suggesting that banks and important financial institutions plan for their own demise.

A senior Canadian finance official said on Wednesday that the Group of Twenty (G20) are thinking about the idea as a way to avoid financial meltdowns.

Lenders quiet on Yell support

For Yell, the publisher of Britain’s Yellow Pages directories, there is a world of difference between 90 and 95 percent.

The lower figure is the amount of lenders backing its debt financing plan, the higher figure is the amount it needs. If it falls short of its target this evening, the company may need to go to the court to push through a deal.

(News story here.)

The proposals are vital to the heavily indebted company’s short-term future, allowing it to rejig its capital structure and tap equity investors for up to 500 million pounds.

Under pressure

 	 REUTERS/Yiorgos KarahalisRestructuring a company’s finances usually means someone takes a loss.

But who should take that loss is often a difficult and nerve-jangling process. Brinkmanship is the usual tactic with hard deadlines often the only way to draw situations to a close. Clever application of legal strategies usually helps also.

All of these factors are at play in the upcoming restructuring of Wind Hellas. The big Greek mobile operator has 3.2 billion euros of debt but is running out of cash to pay its interest bills.

Of the company’s lenders, those at the bottom of the pile — the subordinated bondholders, owed 1.17 billion euros — are under most pressure.

DealZone Daily

A consortium led by Spain’s Cosmen family has decided against making a takeover offer for National Express after spending a month poring over the British bus and train operator’s books, Reuters reported on Friday.

In other news:

Stricken Dutch bank DSB failed to reach a deal with major Dutch banks in late night talks on Thursday aimed at finding an option for DSB’s survival, Dutch media reported.

China Merchants Bank, which is raising 22 billion yuan ($3.22 billion) through a rights issue, won’t unveil new fund raising plans over the next three years, the China Securities Journal reported on Friday, citing president Ma Weihua.

DealZone Daily

Mining group Xstrata did not support hopes of a more general M&A rebound on Thursday, announcing it had no intention of offering for rival Anglo American and that it continued to assess a range of alternative growth options. Read the Reuters report here.

OCBC , the smallest of Singapore’s three local banks, has agreed to buy ING‘s private banking unit in Asia for $1.5 billion, a surprise outcome in a complex drawn-out auction.

CIT Group  is getting closer to finalizing the terms of a new loan that would give the commercial lender, trying to avoid bankruptcy, $3 billion to $6.5 billion, two sources familiar with the matter told Reuters.

DealZone Daily

Cisco Systems plans to buy advanced wireless equipment maker Starent Networks Corp for $2.9 billion to boost its product offerings as phone carriers build out next generation networks, Reuters reports.

In other stories on Wednesday:

Royal Bank of Scotland Group is considering a government-backed plan to give up all 312 of its RBS-branded branches in England and Wales in a move to satisfy European authorities, the Financial Times says.

Las Vegas Sands, which is seeking to raise up to $2.5 billion by listing its Macau assets on the Hong Kong stock exchange, could launch the initial public offering by late November, the South China Morning Post reports.

Deals du Jour

Xerox Corp says it plans to buy Affiliated Computer Services Inc for $5.5 billion to  expand from a document-management company into the outsourcing business. ACS would be the first big deal for new CEO Ursula Burns.

Taiwan says it will allow contract chipmakers and flat-panel firms to acquire rivals in China, a move analysts said will help cement TSMC and UMC’s lead in the semiconductor sector.

For more on these stories and the rest of the latest deals news from Reuters, click here.

Uncle Sam, a shareholder forever?

ShareholderHow long will it take the U.S. government to disentangle itself from the financial services sector?

More than 16 years, according to a new Piper Jaffray paper.

“The more likely answer may be that the U.S. government may never be fully repaid,” reads the paper, “Opportunities for Private Equity in Financial Services,” released last week.

The estimate is based on assumptions, including that $3 trillion of U.S. government funding has to be fully repaid and no addition funds are drawn from $23.7 trillion in commitments.