Distressed debt in Germany: What's next? Possible innovative exit strategies

During the past two years, private equity funds have acquired substantial portfolios of nonperforming loans from banks in Germany. Typically a private equity investor does not commit funds unless exit strategies are clearly defined. The usual exit strategies for distressed debt investors are fix it (restructuring and turnaround), sell it (sale of debt or equity), or shut it down (liquidation). A new alternative exit strategy for NPL investors considered here is the transfer of credit recovery risk. --Focus,diversification,specialization,monitoring,bank returns,bank risk,Non Performing Loans,Distressed debt investing,Synthetic securitization,Collateralized debt obligations,Credit risk transfer,Credit derivatives,Credit default swaps,Credit recovery swaps,Credit portfolio management,Credit portfolio risk,Credit portfolio returns,Efficiency of credit risk portfolio allocations,Learning effects

Modernisierung der Wasserwirtschaft im Spannungsfeld von Umweltschutz und Wettbewerb: braucht Deutschland eine Rechtsgrundlage für die Vergabe von Wasserversorgungskonzessionen?

The working report looks at the actual situation of the German water market, the only infrastructure market the EU has not encouraged to deregulate until now. Especially important factors are the environmental relevance of the water market and the importance of water as a food. At the moment, however, there is a significant structural change taking place in the German water market. This is due to EU initiatives in the areas of Public Private Partnership (PPP) and, in general, to the allocation of public concessions as well as to a considerable need of modernisation and financing of German water management. The working report presents the current situation of this development and based on this tries to develop a sensible concession model for a competitive German water management. That is the only way to achieve the necessary legal security for PPP and its financing in water management. --Water Management,Modernisation,European Union,Internal Market,Public Private Partnership (PPP),Public Concessions,Legal Security,Financing,Privatisation,Liberalisation,Environment

Distressed debt-investing in Deutschland: Geschäftsmodelle und Perspektiven

The global distressed debt market has been established for some years now, however within this investment universe German Distressed Debt is generally considered as underdeveloped. The aim of this paper is to highlight why Investments are transacted and the framework of processes involved within the German market additionally; the paper focuses on current active investors and concludes with a market survey covering the impressions of these participants. --Non-Performing-Loans,Distressed Debt,Distressed Debt-Trading,Bad Bank,Work-Out,Outsourcing,Data Protection,Banker´s duty of secrecy,Due Diligence

Private Equity und Familienunternehmen: eine Untersuchung unter besonderer Berücksichtigung deutscher Maschinen- und Anlagenbauunternehmen

Despite the common view that there is inherently a relationship of confliction, it is now impossible to imagine the financing of family-owned enterprises in Germany without the alternative method of Private Equity financing. Based on a survey on Private Equity in family owned companies specialising in the mechanical engineering sector, this working paper identifies that Private Equity in general is not as unwanted as once assumed. Overall more than 3/4 of the surveyed companies do not exclude investment capital. However, the study demonstrates that the time of large buy-outs is arguably up, and minority capital has now come into vogue. This working paper examines, from the viewpoint of the managing directors of the studied companies, the conceptions and beliefs held by such persons about Private Equity. Generally speaking, besides loss of control, managing directors primarily fear Private Equity because of exaggerated returns on investment at the expense of the long-term development of the company. On the other hand, this paper also highlights that managing directors expect that Private Equity can have a positive element as it can enable bank independence, especially at a time when it becomes increasingly difficult to maintain creditworthiness. Further, this paper analyses the relationship between the managing director of the family enterprise and the Private Equity investor. Because of the special situation of the managing director in a family owned company, trust between that person and the Private Equity investor is one of the most important factors. If there is a lack of trust the business relation is troubled from the start. --Private equity,buyout,family owned enterprises,minority capital,credit crisis,MBO,MBI,return on investments,LBO,leveraged finance,M&A

10 Jahre deutsche Buyouts

Private equity has seen an impressive activity surge in Germany over the last ten years. This working paper meets the increasing thirst for information on the German buyout market with an overview of its historic development, a quantitative analysis of its performance and a future outlook. While the authors’ findings show an outperformance of buyout-financed businesses with regard to sales growth on CAGR basis, profitability growth and capex expansion, significant underperformance in terms of interest coverage levels and equity funding becomes apparent. This is in contrast to studies conducted by private equity associations and consultancies, and gives some validity to the growing fear of target company collapses as a result of riskier financing at the next economic downturn. As far as activity is concerned, the authors project only a short time-out for private equity in the wake of the ongoing credit crisis. The majority of German buyouts are middle market transactions which are fairly unaffected by the crisis and continue to offer great hidden potential. Investor returns are likely to fall in the short and midterm due to higher interest rates and risk premiums but more restrictive financing, in turn, will also lower entry prices. If private equity groups can outbid strategic players at moderate levels going forward, returns should continue to be attractive. --Private equity,buyout,LBO,MBO,financial sponsor,leverage finance,M&A,merger,acquisition,locust debate,credit crisis,sup-prime,middle market

Wertpapierprospekte: Markteinführungspublizität nach EU-Prospektverordnung und Wertpapierprospektgesetz 2005

The legal environment for Securities Prospectuses in Germany has changed dramatically with the implementation of the German Securities Prospectus Act (Wertpapierprospektgesetz - WpPG) and the Commission Regulation (EC) No. 809/2004 of 29 April 2004 (Prospectus Regulation) regulating their content and format and harmonizing the requirements for public offerings and stock exchange listings with effect from 1 July 2005. This working report presents the current situation and describes the experience with BaFin, the German Federal Financial Supervisory Agency that now has sole competence for reviewing and approving prospectuses in accordance with the WpPG. --IPO,Initial Public Offering,Prospectus,Securities,Stock Exchange Act,Stock Exchange Admission Ordinance,German Financial Supervisory Authority,Prospectus Directive,German Securities Prospectus Act,Wertpapierprospektgesetz,WpPG,Public Offer,Subscription Rights,Employee Incentive Programmes,Stock Exchange,Organised Market,Open Market,Entry Standard,Registration Document,Financial Information,European Passport,Notification,Securities Sales Prospectus Act,Securities Sales Prospectus Ordinance

Der deutsche NPL-Markt 2007: aktuelle Entwicklungen, Verkauf und Bewertung ; Berichte und Referate des NPL-Forums 2007

The work report first describes the current developments on the German market for nonperforming loans, which after its peak in spring 2007 is now also affected by the financial crisis. The sale of small and medium-size portfolios is described within the scope of a case study. Furthermore, the report focusses on the automated and trustworthy assessment and the servicing of real property portfolios. --Non performing loans,distressed debt,portfoliomanagement,workout,outsourcing,servicing,banking and regulation law,bankers duty of secrecy,failing banks,corporate loans,consumer loans,real estate loans

Staatsfonds - neue Akteure an den Finanzmärkten?

Sovereign Wealth Funds (SWFs) have become active investors on the financial markets. This working paper meets the increasing thirst for information on the investment activities of Sovereign Wealth Funds, their legal environment and the implications on German stock listed corporations. Thus, this paper examines the history of, and reasons for establishing SWFs. Furthermore, concerns regarding transparency and investment activities of SWFs are discussed. The authors find no evidence for politicaly motivated investments or massive market intervention by SWFs. Furthermore, the authors propose that the newly established Santiago Principles will build up trust in the financial markets. The empirical part of the working paper analyzes the impact of SWFs on German stock listed corporations. Main findings of the survey include that corporations lack information on SWFs and disagree with the planned change of the Außenwirtschaftsgesetz. The Survey's results further indicate that participant corporations have no concerns about SWF investment activities. Only few SWFs were willing to participate in the survey and therefore information from the IMF was utilized to get an overview about the sector. --Sovereign wealth funds,Staatsfonds,Außenwirtschaftsgesetz,portfolioanalysis,monetary reserve,investment strategy,foreign exchange,transparency,Santiago principles

Unternehmen im Prime Standard staying public oder going private? Nutzenanalyse der Börsennotiz

The dramatic drop in prices on the German stock exchange in the period from 2000 to 2003 was one cause for the rising number of delistings in Germany. This development triggered the study on the aptitude of listed companies to remain listed although the authors were well aware that a negative conclusion would not necessarily imply a company's realistic chance of going private, in particular of obtaining the required financing for such a transaction. The study focused on those companies of the Prime Standard that were not included in one of the indices. Using selected indicators, the authors analyzed the question if and to what extent each of the companies examined had reached the goals normally pursued for an IPO. It was concluded that for the overwhelming majority of those companies studied, a listing on a stock exchange would not make sense (any more): in particular, due to the volume of their market capitalization and the liquidity of their stock, they wouldn't interest the analysts and investors nor would their stock prices adequately reflect their intrinsic values. And, especially during these difficult times, it would be very hard to raise additional capital on the markets. --Delisting,going private,market capitalisation,IPO,stock exchange,liquidity,capital raising,stock price

Incentivierung des Managements bei Unternehmenskäufen/Buy-Outs mit Private Equity Investoren - eine empirische Untersuchung

Since years, incentives for the management have become a standard upon acquisitions of companies by Private Equity Investors - so-called Buy-Outs. However, until this date there are no empirical studies available on the arrangements of management participations and potential conflicts of interest especially on occasion of sales from one Private Equity Investor to another - so-called Secondary Buy-Outs. This present study is based on a survey among Private Equity Investors and Management Teams in companies controlled by Private Equity Investors. It shows a high degree of sensibility of all parties concerned for the issue of incentives and the potential conflict of interest involved with it. It also showed that market standards for management incentives have developed in the meantime. In practice, the instrument to prevent conflicts is therefore the transparency of the transaction. The only way to prevent criminal and civil consequences (damages) for the managers involved, as well as obstructing or even frustrating the process as a whole, is an open and transparent communication about the selling process and possible concepts of incentives between all parties concerned, i.e. seller, buyer and the management involved. Despite the frequency of such transactions there are - until today - no market standards or guide lines for this necessary transparency. The present study intends to create initial groundwork for this. --Management Buy-Out,MBO,Management Buy-In,MBI,Leveraged Buy-Out,Private Equity,Secondary Buy-Out,Managementbeteiligung,Beteiligungsvertrag,Bad-Leaver/Good-Leaver,Interessenkonflikt,Beteiligungsquote,Garantien,Exit,Incentivierung,Reporting,Transparenz