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Commerzbank Wants to Break Free From Government

Reuters
Wednesday, 6 Apr 2011 | 3:35 AM ET

Commerzbank on Wednesday presented a plan to repay the majority of state aid by June. The plan is to pay back 14.3 billion euros ($20.3 billion) of the 16.2 billion euros in so-called silent participation, a form of non-voting capital injected by the German government at the height of the financial crisis.

Reichstag Parliment building, Berlin, Germany
Maremagnum | Getty Images
Reichstag Parliment building, Berlin, Germany

A rights issue will take place between May and June, with a total of 8.25 billion euros to be raised on capital markets, Germany's second biggest lender said.

In addition, silent participations worth 2.75 billion euros are to be converted into Commerzbank shares or contributed as part of a rights issue.

"The announcement doesn't come as a surprise but considering that there is now a concrete time frame and things are really getting moving, the share should react well today," trader at Frankfurt's Alpha Trading brokerage said.

"The fact that the AGM is being pulled forward also shows that there is a certain urgency which will likely encourage investors," he added.

Earlier this month, Reuters said Commerzbank is putting the finishing touches on a "big bang" plan for repaying state bailout money.

From April onwards Commerzbank plans to place conditional mandatory exchangeable notes, which will be converted into shares, Commerzbank said.

German state bailout fund Soffin injected 16.4 billion euros of so-called "silent participations", a form of non-voting capital contribution, and a further 2 billion euros in exchange for a 25 percent stake in Commerzbank during the financial crisis.

Chief Executive Martin Blessing had said earlier this year that Commerzbank was planning to repay a sum running into the billions this year, while maintaining a "healthy" equity ratio.

Germany's second biggest lender has said its repayment plan will include raising capital, retaining profits and using unneeded capital reserves that are freed up as Commerzbank reduces risky assets.

Once it starts paying interest on bailout money, Commerzbank will be allowed to lift pay limits on top bankers.

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