In August 2013, Hypo Real Estate Holding AG (HRE Holding) began the process of selling its subsidiary DEPFA Group. A decision was made by the Federal Republic of Germany’s inter-ministerial steering committee in May 2014 not to privatise DEPFA Group but to transfer it to FMS Wertmanagement AöR (FMS-WM), the German government’s winding-up institution for the nationalised HRE Holding AG.
On 19 December 2014, FMS-WM acquired 100% of the shares in Irish bank DEPFA and quickly established a new DEPFA management team who have rolled out a targeted business plan focusing on:
- Preserving capital and winding down the balance sheet of the Group in a manner designed to maintain value.
- Optimisation of the funding structure with the surety of backing from FMS-WM
- Simplification of the corporate organisational structure
In May 2015 FMS-WM purchased hybrid capital debt instruments issued by DEPFA through the funding vehicles: DEPFA Funding II LP, DEPFA Funding III LP and DEPFA Funding IV LP, at a discount of approximately EUR 459 million. The remaining hybrid securities issued by these vehicles not acquired by FMS-WM were subsequently acquired by DEPFA, such that DEPFA and FMS-WM jointly hold 100% of DEPFA's hybrid capital debt instruments with an aggregate nominal value of EUR 1.2 bn.
In January 2016, FMS-WM published a buy-back offer for DEPFA’s covered bonds. This successful buy-back provides the basis for the faster unwinding of the DEPFA Group’s two subsidiaries, DEPFA ACS BANK DAC (DEPFA ACS) and DEPFA Pfandbrief Bank International S. A. (DEPFA PBI). FMS-WM has purchased as of the 29th of July 2016 a total nominal amount of EUR 5.6 bn of DEPFA group covered bonds. Covered bonds in a nominal amount of EUR 2.6 bn were purchased in the context of the public tender offer and a further EUR 3 bn were acquired by FMS-WM under bilateral agreements with investors.
The purchases by FMS-WM of the various debt instruments issued by the DEPFA group aim at preparing an accelerated wind down of DEPFA. In a next step DEPFA group's liabilities could be reduced and, in cooperation with FMS-WM, the cover pools of DEPFA ACS and DEPFA PBI could be adjusted accordingly. This may significantly reduce DEPFA's balance sheet in the mid-term and this strategy may affect the future market liquidity of the outstanding securities issued by DEPFA ACS and DEPFA PBI.
DEPFA and FMS-WM will assess further measures in compliance with legal requirements to support the accelerated wind down of the DEPFA group. This may include in particular a removal of ratings where there is no contractual requirements to maintain such ratings.
DEPFA is not permitted to underwrite new business. Instead, the remaining portfolio must be unwound in a way that maximises its value. As an independent bank, DEPFA is regulated by the Central Bank of Ireland and subject to Irish banking and supervisory law.