Østjydsk Bank A/S agreed with fellow Danish lender Sparekassen Vendsyssel for the latter to take over all its activities, including all assets and liabilities except its subordinated capital, for 50 million Danish kroner.
The acquisition includes Østjydsk Bank's approximately 14,000 customers, its balance of around 2.7 billion kroner, loans of roughly 1.6 billion kroner, deposits of about 2.2 billion kroner and guarantees of around 700 million kroner. The bank's employees will also be transferred to Sparekassen Vendsyssel as part of the deal.
Østjydsk Bank said it had come to the agreement after concluding that it could not comply with requirements recently imposed by the Danish Financial Supervisory Authority and that it was not possible for the bank to continue in its present form.
Following an inspection of Østjydsk Bank at the end of 2017, the regulator had required it to maintain an individual capital requirement of 20.5% as part of a recovery plan it would have to prepare, the bank said Feb. 22.
Østjydsk Bank said it had explored several options as part of the recovery plan, including a potential sale, merger and/or recapitalization, although it had not been able to find a solution that could ensure that it would meet the capital requirements.
In connection with the sale, Østjydsk Bank said there would be no cover for its shareholders and only partial cover for its subordinated capital, as the acquisition by Sparekassen Vendsyssel covers only the lender's activities, customers and employees, but not its obligations to its shareholders.
The absence of shareholder cover is due in part to Østjydsk Bank's high-risk capital loans issued before the financial crisis, CEO Max Bäckström said. Despite generally improving conditions in recent years, most of the exposures had not seen a significant corresponding improvement, the bank noted.
Østjydsk Bank said its subordinated capital would receive dividends as part of its bankruptcy estate, although it has yet to determine the amount.
As part of the transaction, the bank will file a petition for bankruptcy proceedings and its board of directors and executive board will resign.
Following the deal, Bäckström will continue in a new role at Sparekassen Vendsyssel as regional director of Østjydsk Bank's previous activities in the Danish areas of Mariager, Hadsund and Hobro, while five members of Østjydsk Bank's board of representatives will transfer to Sparekassen Vendsyssel's board of representatives.
Trading in shares and bonds issued by Østjydsk Bank and admitted to trading on the official list of Nasdaq Copenhagen has been suspended in connection with the deal, the bank added.
As of Feb. 22, US$1 was equivalent to 6.04 Danish kroner.