In 2004 SPD chief Franz Müntefering made headlines by attacking the private equity "locusts" (Heuschrecken) that were swarming over German industry, sucking out the substance while laying off thousands of German workers. Since then, private equity firms have been highly unpopular in Germany. That is why I nearly fell off my chair when I read this report:
Germany drew a line under one of its biggest banking crises on Thursday as it revealed a deal to sell IKB, the lender stricken by subprime investments, to a US investment group.
Lone
Star is acquiring more than 90 per cent of IKB from KfW, the German
state-owned development bank, for an undisclosed “low three-figure”
sum.[…]The
deal emphasises the continuing importance of international private
equity investors to Germany, in spite of political hostility towards
such “locusts”.
And, Die Welt had this sardonic statement:
Als
„Heuschrecken“ wurden die Lone Stars dieser Welt einst von SPD-Mann Franz
Müntefering verunglimpft. Nun hilft ausgerechnet eine Heuschrecke der
Politik dabei, das Milliardengrab IKB zu schließen. (At one time the Lone Stars of the world were scorned by SPD leader Franz
Müntefering as "locusts". Now it is none other than a locsut that is helping the policy makers close up a hole that has drained billions.)
Die Welt estimates that the IKB subprime debacle cost each German taxpayer 125 euros with the various bail-out packages. With the Lone Star deal, the IKB shareholders have been wiped out completely and the bondholders are unlikely to see any interest payments for years.
There is only one immediate winner in Lone Star deal: Deutsche Bank. It was Deutsche Bank who bundled the subprime mortgages into CMOs and funneled them to IKB, earning $$millions in fees in the process. Rather than forcing Deutsche Bank to acquire the assets of IKB and reimburse the German taxpayers, the German government, by blessing the Lone Star transaction, is allowing Deutsche Bank to walk.
