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EC formally approves HSH Nordbank bad loan sales, sets privatization deadline

The European Commission completed its state aid proceedingsfor HSH Nordbank AG,formally approving the transfer of bad loans worth €6.2 billion at marketprices to its major shareholders and the sale of a further €2 billion worth ofbad loans, with any resulting losses to be covered by state guarantees.

The EC also approved the increase of the state guarantee forHSH Nordbank to €10 billion from €7 billion. The final approval follows theMarch agreementbetween the German government and the EC and serves as the basis for therestructuring of thelender, which will also provide for a change in ownership.

The EC said HSH Nordbank must complete its privatization bythe end of February 2018, with the potential for a six-month extension shouldimplementation be delayed for reasons outside the scope of the federal statesof Hamburg and Schleswig-Holstein. The states may keep a combined stake of 25%for up to four years.

As part of the changes, the operational part of HSH Nordbankwill make a one-off payment worth €260 million to a new holding company, whichwill receive roughly €50 million for operating expenses and about €210 millionfor the state guarantee premium obligations it will assume during the sellingprocess. These payments will be included in HSH Nordbank's 2015 , which will be releasedJune 9.