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JC Flowers to be shut out as judges rule in favour of Hypo Real Estate nationalisation

20 Jan 2011

US financial services-focused firm JC Flowers looks set to lose its stake in German mortgage bank Hypo Real Estate after a Munich court ruled that the squeeze out of minority stakeholders was an acceptable by-product of its nationalisation, according to reports.

JC Flowers had submitted a suit, alongside 37 other minority shareholders in the bank, in a bid to block the transfer of their shares, but the Regional Court of Munich ruled that the squeeze out of minority investors had been proportionate, given the urgency of the situation.

Hypo’s approach, which combines property finance and investment banking, took a severe hit during the downturn, and was forced to seek the German government’s help, securing €100bn in guarantees.

The government then allowed it to transfer loans and securities nominally worth €173bn to a “bad bank” to allow it to restructure. Flowers and other minority shareholders were forced to sell their stakes in the business in the upheaval, with Hypo’s legal team arguing that full ownership was necessary to guarantee the success of the bail-out, which was Germany’s first bank rescue in nearly 80 years.

JC Flowers is said to be considering the acquisition of a stake in privately-held Brazilian bank Banco PTG Pactual SA.

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