Portigon progresses in restructuring by selling WestLB Mellon stake

Portigon, the former West LB AG, has taken another step in the post-crisis rehabilitation its chief executive has called “very painful for employees and the managing board”, by selling its half-stake in WestLB Mellon Asset Management to BNY Mellon.

The sale, for an undisclosed sum, gives control of the former joint venture to BNY Mellon.

The €25.5bn manager WestLB Mellon Asset Management was formed in early 2006 as an equally owned venture between BNY Mellon and Portigon, formerly West LB AG.

West LB AG had struck problems in 2008, which the European Commission described as “serious financial difficulties due to excessive risk taking prior to the 2008 financial crisis”.

With €23bn in sub-prime structured assets in its portfolio, the group asked its state owners for a €5bn central guarantee. To win EC approval for this, it had to submit a restructuring plan to the Commission. Not having won final approval for this, it underwent a forced restructuring, splitting it up, from December 2011, and WestLB as a branded entity ceased to exist.

Two of the three units subjected to the restructuring followed the good bank / toxic bank model also formed in the UK for Northern Rock during the 2008/2009 emergency, and in European countries more recently in the sovereign debt crisis.

One of these units is called Erste Abwicklungsanstalt, held by the state of North Rhine-Westphalia, formed to wind down the bank’s toxic assets.
The second, WestLB’s savings bank business, is called Verbundbank. It has been acquired by fellow Landesbank Helaba based in Frankfurt.

The third entity is effectively Portigon, a portfolio and asset manager born in July out of the ashes of the remaining part of WestLB.

It will concentrate first on helping wind down toxic assets and its former ‘brother’ Erste Abwicklungsanstalt, but Portigon will then extend such help to parties in similar situations, such as wind-down vehicles, banks with internal restructuring units. and capital investors holding or intending to acquire large credit and/or securities portfolios.

In August Portigon said its focus was on acquiring new customers. At the same time it announced the restructuring of the group was “on the home straight”.

It has suffered in the process, though, and posted a pre-income tax loss of €365m in the first half of this year, compared to €50m pre-tax profit a year earlier. Group income fell by €506m, year on year, to €237m.

This year to June it shed 225 full-time staff, leaving it with 3963, and cut administrative expenses by 13% to €416m.

The group has signed agreements to sell subsidiaries Banco WestLB do Brasil S.A., Bank WestLB Vostok and Universal Factoring GmbH, among other M&A.

 

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