SNS Reaal NV (SR), a Dutch bank and insurer burdened with souring real estate loans, said it’s still in talks with private investors to bolster capital and that there’s no certainty a deal will be reached.
While the “scenario has been intensively discussed,” the Utrecht, Netherlands-based firm said in a statement today, “there is no certainty whatsoever that these talks will yield results.”
SNS Reaal is in discussions with a group led by CVC Capital Partners Ltd. on a 1.8 billion-euro ($2.4 billion) investment, Dutch newspaper Het Financieele Dagblad reported today. SNS Reaal, which acquired ABN Amro Holding NV’s property-finance unit in 2006, has been hurt by losses on real estate loans that left it struggling to repay a government bailout and depleted its capital buffers.
“It’s positive private investors may be willing to participate in a solution,” said Tom Muller, an Amsterdam-based analyst at Theodoor Gilissen Bankiers NV. “Still, shareholders seem to be heading for a massive dilution in all scenarios and there are a lot of hurdles left to take, including approval from Dutch and European authorities.”
The Dutch government will have to be involved in any solution as SNS Reaal hasn’t repaid a bailout received in 2008, he said. Muller has a hold recommendation on SNS.
SNS shares swung from gains of as much as 5.2 percent to losses of as much as 9.1 percent in Amsterdam trading today. The stock was down 3.2 percent to 84 cents as of 3:59 p.m., for a market value of 242 million euros.
CVC is leading the consortium that includes Dutch asset manager PGGM NV, Het Financieele Dagblad reported. Officials for London-based CVC and PGGM declined to comment. A SNS Reaal spokesman, Roland Kroes, referred to today’s statement.
SNS Reaal is the smallest of four Dutch banks designated as “systemically important,” or too big to fail, by the Dutch central bank. It had 32.5 billion euros in savings at the end of the third quarter, according to a Nov. 15 presentation.
Its three larger competitors, ING Groep NV (INGA), Rabobank Groep and ABN Amro, would be willing to give SNS a subordinated loan for 400 million euros if talks with the investors succeed, Het Financieele Dagblad reported. Officials for ING, ABN Amro and Rabobank and the Dutch Finance Ministry declined to comment.
SNS started withdrawing from commercial real estate lending in 2009, when its property-finance unit reported a loss of 219 million euros. With loan losses spreading from the U.S. to its home market, it has remained unprofitable every year since. From August 2009 until the end of September, SNS Reaal has cut back its commitments by 48 percent to 8.3 billion euros, according to a presentation on Nov. 15. Loan losses rose when property values decreased and refinancing became more difficult, it said.
The company received 750 million euros from the Netherlands in 2008 and 500 million euros from Foundation Beheer SNS Reaal, its largest shareholder. SNS sold shares in 2009 to help repay 250 million euros of aid, of which 185 million euros was returned to the government. The aid, granted in the form of core Tier 1 securities issued to the state, may be converted into ordinary shares, it said in November.
SNS repeated today that there will be a “significant share issue” and “transactions with regard to outstanding subordinated instruments,” if the negotiations succeed. The securities issued to the Netherlands are unsecured, subordinated liabilities, according to terms published on the firm’s website.
“We consider this as just one of the many scenarios which are being discussed,” Cor Kluis, an Utrecht-based analyst at Rabobank International, said in a report to clients today. He added there’s only a small likelihood it will succeed. Other outcomes could include a sale of SNS Reaal’s insurance operations or nationalization, he said.
NL Financial Investments, an independent agency managing the government’s stakes in ABN Amro and insurer ASR Nederland NV, proposed to sell the latter to SNS in exchange for new shares valued at 2 billion euros to 2.5 billion euros, Het Financieele Dagblad reported separately today. That would effectively give the Netherlands a majority stake in SNS, the paper said.
Officials for ASR, NL Financial Investments and the Finance Ministry declined to comment.
The Dutch government bought Fortis’s Dutch banking and insurance units and its stake in ABN Amro Holding NV for 16.8 billion euros in October 2008 after the company ran out of short-term funding as customers withdrew deposits and investors lost confidence. The banking businesses, now ABN Amro Group NV, were merged and separated from the insurance unit, ASR.
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