Investors in subprime-stricken lender IKB took a further blow on Monday as details of government plans to rescue and sell the bank stoked uncertainty and wiped a further quarter off the shares.
IKB unveiled details over the weekend of a third bail-out package hammered out with its state owners that would see a six-fold increase in the number of its shares and an emergency 600 million-euro ($881 million) cash injection that may have to be paid for out of future profits.
The bail-out package has also jeopardized government plans to sell IKB.
Several sources familiar with the situation told Reuters on Monday that a deadline for non-binding offers for the bank, initially set for Monday, had been delayed by at least a week to give potential bidders a chance to study the restructuring deal.
German state development bank KfW, which is collecting bids for IKB, declined to comment.
UniCredit said in a note to clients: "Several uncertainties remain regarding potential additional losses and the contractual details related to the direct capital injection."
Landsbanki Kepler analyst Dirk Becker said the planned expansion in the number of shares to about 580 million from around 90 million currently would seem to yield a share price of around 2.30 euros per share, but that this did not take into account the "enormous dilution of the rights".
"This is the final blow for all investors who were hoping to gain something from the government rescue package," Becker said.
IKB shares fell 24.2 percent to 5.12 euros, having sunk to 4.98, compared with a 1.4 percent gain in the German mid-cap index.
Haemmoraging Money
IKB, principally a lender to Germany's medium-sized companies, gained notoriety last year as one of Europe's first lenders to unveil huge financial problems linked to its investments in the market for risky subprime mortgages in the United States.
KfW, which holds a stake of nearly 40 percent in IKB, the country's regulators and bankers have repeatedly stepped in to shore up IKB as ructions in global credit markets turned its investments from bad to worse.
KfW has been trying to sell IKB but some potential bidders that had indicated initial interest, such as Germany's Commerzbank and the country's cooperative banks, have said they are no longer interested.
Late on Saturday IKB gave the details of the third bail-out, brokered by German finance minister Peer Steinbrueck earlier in the week, under which KfW has promised financial regulators that IKB will receive at least 1.25 billion euros of the 1.487 billion it is seeking.
IKB said KfW had agreed with German financial watchdog BaFin to strengthen IKB's core regulatory capital by 600 million euros by Feb. 19. The details of the injection had yet to be determined and may require KfW to be compensated out of IKB's future profits, IKB said.
The lender also said it expected to lose 550 million euros this financial year against a previous estimate of a 700 million euro loss.