In a last-ditch attempt to save Babcock-Borsig, the North Rhine-Westphalian state government called a meeting of the engineering giant's bankers and shareholders, but insiders described the move as too little, too late.
Babcock Borsig -- a company rich with tradition in Germany
The state government of North Rhine-Westphalia on Tuesday made a last-minute attempt to rescue the traditional engineering giant Babcock Borsig AG. State premier Wolfgang Clement invited representatives of the group’s principal bankers and shareholders to a crisis summit in Düsseldorf, scheduled for Wednesday.
If the group does not receive a fresh cash injection of 200 million euro by Wednesday, it will be unable to pay June salaries and will be forced to file for insolvency. Babcock employs 22,000 people worldwide. Some 8,000 of them are based in North Rhine-Westphalia.
Intense negotiations between Babcock’s principal bankers – a consortium of WestLB, Deutsche Bank, Dresdner Bank, Commerzbank, BHF-Bank and HypoVereinsbank – failed to produce an agreement in support of Babcock’s restructuring plan, which was drawn up for the group by business consultancy Roland Berger. The plan involves the divestment of around half of the group’s current activities and a switch of its focus to energy technology. The implementation of this plan, which would see the group’s annual revenue reduced to 2.5 billion euro, would cost a further 500 million euro. Of Babcock’s shareholders, only WestLB and Tui AG (formerly Preussag) have so far indicated their willingness to participate in a capital increase.
The increase is necessary because this year’s losses will completely swallow up the group’s equity capital. As some 1,500 Babcock employees demonstrated outside North Rhine Westphalia’s parliament in Düsseldorf on Tuesday, Clement pledged additional state aid for the troubled company. But his hands are tied. Any additional funding over and above the 35 million euro state guarantee he has already granted will require approval from the EU Commission.
People in Frankfurt’s banking circles said that if Clement had been really serious about rescuing Babcock, he would have acted much earlier. They suggested that the last-minute meeting was aimed at laying the blame for the collapse of the group on the banks.