Bloomberg News

SNS Investors Challenge Dutch-Ordered Wipeout at Highest Court

February 06, 2013

The Netherlands’ top administrative court said at least 25 SNS Reaal NV investors appealed the government’s decision to take control of the nation’s fourth- largest bank and expropriate the securities they owned.

As of yesterday, 25 investors, mostly not institutions, had filed an appeal to the Council of State, said Wendy van der Sluijs, a spokeswoman for the court in The Hague. The deadline for appeals is Feb. 11, 10 days after the SNS nationalization decree. The court will subsequently organize a hearing and present its ruling before the end of the month, she said.

Finance Minister Jeroen Dijsselbloem took control of SNS Reaal on Feb. 1 after real-estate losses brought the bank to the brink of collapse. The nationalization included issued shares and subordinated bonds. It’s the first time European authorities have immediately wiped out holders of subordinated debt of a bailed-out bank, according to data compiled by Bloomberg.

“I expect many legal actions to come against the Dutch government, although the actions themselves are irreversible under the law,” said Sweder van Wijnbergen, a professor of economics at the University of Amsterdam.

The appeals so far came from investors in countries including the Italy, Germany, Belgium, Andorra and Indonesia, as well as the Netherlands, Van der Sluijs said. Dutch newspaper Het Financieele Dagblad reported the appeals earlier today.

Bailout Costs

After the financial crisis led to the nationalization of the Dutch parts of Fortis and ABN Amro Holding NV in 2008 and the bankruptcy of DSB Bank NV, the Netherlands adopted legislation allowing the state to take control of banks’ assets, liabilities or stock.

The Dutch state says the bailout of SNS Reaal will cost taxpayers 3.7 billion euros ($5 billion) in write-offs and capital injections, and the government is also providing 6.1 billion euros in loans and guarantees. The expropriation of subordinated creditors reduced the rescue costs for the state by about 1 billion euros, Dijsselbloem said on Feb. 1.

Several other court procedures may follow. The Enterprise Chamber of the Amsterdam Court of Appeal will set the compensation the Dutch state must pay to expropriated investors. Such compensation should be zero for shares and loans, according to Dijsselbloem. Investors who object to the compensation offer can appeal to the Enterprise Chamber.

VEB, a Dutch investor group, will be considering all legal options, Chairman Jan Maarten Slagter said in an interview. Besides an appeal, VEB has asked Dijsselbloem to enable the Enterprise Court to order a probe into SNS Reaal’s management since its 2006 stock-market listing, according to a statement on the group’s website.

SNS Reaal suffered problems as a result of “mismanagement at a bank where wrong choices were made,” Dutch Prime Minister Mark Rutte told reporters on Feb. 1. “Big blunders and big mistakes have been made.”

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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