FRANKFURT, Oct 19 (Reuters) - The sale of IKB by U.S. investor Lone Star is unlikely to succeed, given the crisis-ridden German bank's lack of earnings power and legacy risks, Moody's credit rating agency warned.
Earlier this month, Lone Star said it was getting ready to sell IKB and could strike a deal as early as the first quarter of 2011.
Moody's poured cold water on the idea of a smooth transaction in a note published on Tuesday.
'Lone Star claims it has chosen the right time for a sale as it has cleaned up the bank. But IKB not only remains structurally unprofitable, it also still carries substantial legacy risk, particularly litigation risk,' Moody's senior credit officer Katharina Barten said.
The sale is unlikely to succeed, given that IKB is 'hardly in better shape than two years ago when Lone Star acquired it, and a proper turnaround is not in sight'.
Funding problems and the bank's continued dependence on 10 billion euros in liquidity guarantees from the German government's financial market stabilisation fund continue to cloud IKB's prospects, Moody's said in the note.
Lone Star was not immediately available for comment.
Analysts had expected potential buyers to be large European banks seeking to expand their business with Germany's small and medium-sized companies, where IKB has long-standing ties.
IKB, known before the crisis mainly as a lender to mid-sized German firms, shot to notoriety in 2007 as the country's first casualty of the subprime mortgage crisis in the United States, when billions of euros of its investments turned sour.
After bailing out IKB, Germany's state development bank KFW sold it to Lone Star.
(Reporting by Edward Taylor; Editing by Will Waterman) Keywords: IKB/MOODYS (+49 69 7565 1187; Edward.Taylor@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Earlier this month, Lone Star said it was getting ready to sell IKB and could strike a deal as early as the first quarter of 2011.
Moody's poured cold water on the idea of a smooth transaction in a note published on Tuesday.
'Lone Star claims it has chosen the right time for a sale as it has cleaned up the bank. But IKB not only remains structurally unprofitable, it also still carries substantial legacy risk, particularly litigation risk,' Moody's senior credit officer Katharina Barten said.
The sale is unlikely to succeed, given that IKB is 'hardly in better shape than two years ago when Lone Star acquired it, and a proper turnaround is not in sight'.
Funding problems and the bank's continued dependence on 10 billion euros in liquidity guarantees from the German government's financial market stabilisation fund continue to cloud IKB's prospects, Moody's said in the note.
Lone Star was not immediately available for comment.
Analysts had expected potential buyers to be large European banks seeking to expand their business with Germany's small and medium-sized companies, where IKB has long-standing ties.
IKB, known before the crisis mainly as a lender to mid-sized German firms, shot to notoriety in 2007 as the country's first casualty of the subprime mortgage crisis in the United States, when billions of euros of its investments turned sour.
After bailing out IKB, Germany's state development bank KFW sold it to Lone Star.
(Reporting by Edward Taylor; Editing by Will Waterman) Keywords: IKB/MOODYS (+49 69 7565 1187; Edward.Taylor@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.