One man’s trash is another man’s treasure, and for Dallas-based Lone Star Funds, the latest haul comes in the form of defunct German lender IKB Deutsche Industriebank. The Dusseldorf-based bank has lost a third of its value since bingeing on subprime, and Lone Star has stepped in to bail it out at a price somewhere below $1.2 billion. Bloomberg:
The U.S. firm said it will acquire a 91 per cent stake in Dusseldorf-based IKB from state-owned development bank KfW Group after beating a rival bid from RHJ International SA, Timothy Collins’s investment firm. KfW declined to give the precise purchase price today, saying only it didn’t get the 800 million euros ($1.2 billion) the government had originally sought.
The agreement ends an 11-month search for a buyer. The government led a 10 billion-euro bailout after part of IKB that bought subprime mortgages ran out of funding last July. KfW has since ousted Chief Executive Officer Stefan Ortseifen and three other top IKB executives after auditors blamed “flawed” risk management for the lender’s collapse.
“This will finally bring clarity and calm,” Green party lawmaker and KfW administrative board member Christine Scheel said in a telephone interview today. “It was the right decision to sell the bank as quickly as possible.”
Headed by John Grayken, formerly of Morgan Stanley, Lone Star has been gorging on the detritus of financial crises for 20 years. In recent months, Lone Star bought commercial lender CIT’s home lending unit for $1.5 billion (including $4.4 billion in debt), Bear Stearns’ mortgage business, and another mortgage lender, Accredited Home Lenders Holding Co., for $295 million. Lone Star’s most celebrated deal, however, was its purchase of $30.6 billion of CDOs from Merril Lynch (for $6.7 billion)
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