Troubled German lender WestLB AG and the Government's Soffin bank rescue fund have reached an agreement on the structure and timetable for the stabilization of the lender, and to shift up- to one third of its assets into a so-called "bad bank".
Under the arrangement, WestLB will be transferring nearly 85 Billion Euros ($127.2 Billion) worth of its assets into a namesake "work-out entity" by April 30, 2010. These assets will then be either run down or sold, and Soffin will be injecting funds into the bank's remaining entity to keep it up and running. The arrangement has been confirmed by WestLB.
To begin with, Soffin will take a "silent participation" in the agreement of funds worth 3 Billion Euros, which can be converted into WestLB shares starting July 1, 2010. If converted into shares, the funds could amount to as much as 49% worth of Soffin's stake in WestLB.
The agreement has come after weeks of negotiations between the Government and the lender's owners, including the state of North Rhine-Westphalia and two local savings banks.
The agreement is scheduled to go into effective on January 01, 2010, all parties involved have confirmed.