For a long time Landesbank Baden-Württemberg (LBBW) was considered one of the most stable of the publicly owned German banks known as Landesbanks. Even as the first signs of the subprime crisis emerged in 2007, the Stuttgart-headquartered bank was strong enough to launch a $750 million rescue takeover of rival bank Sachsen LB in the former East Germany. “The perception was that it was a very solid, well-managed bank,” says John Flüh, a corporate partner with Hengeler Mueller in Berlin who has advised on numerous deals in Germany’s banking sector over the last decade, although not on LBBW’s restructuring.
After the collapse of Lehman Brothers, however, LBBW was crippled by its earlier acquisitions–in 2005 it had also acquired neighboring Landesbank Rheinland-Pfalz–and by its exposure to toxic assets such as subprime mortgages. It was forced to turn to the local government for financial aid, and to lawyers at Freshfields Bruckhaus Deringer for advice on a rescue package. The government bailout, made up of a capital injection of €5 billion in tier-one capital and guarantees of €12.7 billion for two portfolios of structured securities, brought LBBW to the attention of the European Union’s antitrust authorities, which take a dim view of state aid to businesses. The European Commission is now forcing LBBW to downsize dramatically—shedding about 40 percent from its balance sheet of more than €400 billion ($546.5 billion). It’s been quite a comedown for the once-admired bank.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
