Holzmann Faces Liquidity Shortage
March 11, 2002
The current financial woes of ailing German construction group Philipp Holzmann AG are much more dramatic than many of its creditors expected, according to documents that the group presented to the banks at a meeting on Friday.
People close to the creditors said that Holzmann announced it will book a loss of €237 million ($207 million) for 2001, far above the €80 million loss it had expected, which would have been in line with the previous year's result.
In the run-up to Friday's meeting, a loss of around €199 million had been spoken of. The increase in the loss was caused on the one hand by the group's failure to carry out real-estate divestments that would have boosted earnings, and on the other by the ongoing slump on the German construction market, which resulted in additional restructuring costs for the group.
Holzmann was rescued from the brink of bankruptcy only two years ago, when Chancellor Gerhard Schröder intervened personally and persuaded the group's creditors to tie up a joint rescue package.
At €237 million, last year's loss will far exceed the group's capital, which at the end of 2000 totaled €126 million.
"Without rescue measures, Holzmann will face liquidity shortages at the end of this year at the latest," one bank manager told Handelsblatt.
To prevent this situation from arising, the creditors on Friday agreed on an initial aid package for a capital injection, the size of which is not known. In return, the banks will receive as collateral construction-services firm HSG Philipp Holzmann Technischer Service GmbH, which in 2000 had earnings of around €5.3 million.
But the actual rescue plan drawn up by Deutsche Bank, as Holzmann's largest creditor and shareholder, met with a less than enthusiastic response from other creditors. Under the plan, the banks are to take over all of Holzmann's problem children – including its portfolio of real-estate interests, weighed down by bloated rent guarantees – and incorporate them into an independent company.
The total transaction would have a volume of around €1 billion.
The smaller creditors believe that this plan would entail additional risks for them. They said that Deutsche Bank was exerting pressure in the negotiations only so that it would be able to sell its stake in Holzmann as soon as possible. The banks will meet for another meeting at an as-yet unspecified date to discuss their next moves.