US financial market crisis: EU approves aid for Sachsen LB
Brussels – Today the European Commission approved aid to salvage and restructure Sachsen LB.
When the bank found itself in massive financial difficulties, a pool agreement was concluded with
other regional banks. In the next phase Sachsen LB was sold to Landesbank Baden-Württemberg (LBBW).
LBBW is the largest of the regional banks in Germany.
This is the first bank case approved by the European Commission in connection with the US
subprime crisis. Thus, Sachsen LB is the first bank that could be led back to calmer waters after
Sachsen LB was in dire financial straits as a result of the US subprime crisis. Since the
liquidity support from other banks did not bring about the necessary breakthrough, Sachsen LB was
sold to LBBW in August 2007. Sachsen LB faced further difficulties in the fall of 2007 when the
financial market crisis did not subside. Thus, in December 2007 the Free State of Saxony declared
that it was willing to spin off particularly high risk capital market items of approx. EUR 17.5
billion from Sachsen LB into a special purpose vehicle. The Free State of Saxony put up a
non-payment guarantee of EUR 2.75 billion for this portfolio. The European Commission was notified
in January 2008 of the measures in support of Sachsen LB. The European Commission then initiated
formal investigation proceedings in late February.
Through intense negotiations with the EU Commission, which also involved the minister presidents
of Baden-Württemberg and Saxony, the Commission granted its approval after an unusually short
review period of only four months.
Before and during the investigation proceedings before the European Commission, LBBW was advised
by a team from the CMS Hasche Sigle Brussels office led by Dr Michael Bauer. The legal team of LBBW
was led by Dr Armin Brendle, Head of group strategy and legal department, and Dr Stefan Hofmann,
Head of legal department (domestic). CMS also advised LBBW on the acquisition of Sachsen LB.
Adviser CMS Hasche Sigle
Dr Michael Bauer
Dr Matthias Nordmann
Dr Rolf Hempel
Contact CMS Hasche Sigle:
Dr Michael Bauer
Tel.: +32 (2) 65 00 425