Deutsche's Rescue Plan for Holzmann Faces Opposition

A question mark stands over Deutsche Bank's rescue plan for Philipp Holzmann AG after it was rejected Thursday by three other major creditors of the beleaguered construction group.

Dresdner Bank, HypoVereinsbank and Bankgesellschaft Berlin are unwilling to support the rescue package drawn up by Deutsche, which is also a major shareholder in Holzmann, while Commerzbank is seeking further clarification, people close to the banks said.

The latest development also puts a question mark over the 200 million euros capital injection, which Holzmann needs to avoid insolvency.

Holzmann said in a brief statement on Thursday that approval of the rescue package was still required from three creditors.

Current talks would therefore continue, it said. According to people close to the banks, Dresdner, HypoVereinsbank and Bankgesellschaft said in a letter to Deutsche that its plan lacked a future strategy for the construction group.

"Without this strategy it makes no sense to pump more money into Holzmann," a bank manager said. Even though the three banks are in a minority among Holzmann's creditors, their opposition adds to the pressure on the group.

It is in urgent need of a capital injection to avoid insolvency after it booked losses of 237 million euros last year. Equity capital totaled just 126 million euros at the end of 2000.

Despite Holzmann's tense situation, some of its key creditors are clearly unwilling to make further funds available.

This unwillingness points to a lack of confidence in the group's future. "One has to ask at some point whether an insolvency is, in the end, the better solution," the bank manager said.

According to preliminary figures, Holzmann booked a loss of 114 million euros on its domestic market alone last year.

Several of its major building sites in Germany are making a loss. "That is surely an indication that there are also problems in its operating business," the bank manager said.

Against this backdrop, the statement by Deutsche Bank chief executive Rolf E. Breuer that Holzmann was not facing a liquidity crisis met with bewilderment.

"We can't understand those comments," a person close to the banks said. A spokesman for Deutsche said that Breuer had "merely said that there is no liquidity crisis.

And he's right. This is a case of overgearing".

Andre Leysen, chief executive of Holzmann's other major shareholder, Gevaert, said that the key issue was to what extent existing liabilities and current operating losses contributed to Holzmann's negative result.

Only when this question was resolved could a sensible restructuring plan be draw up.