Lone Star, a private US-based equity group, is to buy a majority share in Germany's IKB, the country's first and most prominent casualty of the subprime mortgage crisis.
IKB searched for a buyer for nearly a year
German state-owned development bank KfW said Thursday, Aug. 21, that it had sold its stake in the ailing business bank IKB to Lone Star for an undisclosed price.
The Dallas-based equity group is to acquire a 90.8 percent stake in IKB, which specializes in loans to small and medium sized businesses.
IKB's stock price skyrocketed by more than 10 percent when news of the deal reached traders on Thursday.
Last year, KfW was forced to throw IKB a financial lifeline worth 10 billion euros ($14.8 billion dollars) as the global credit crunch triggered by US mortgage industry upheaval took shape.
Despite the bailouts, the battered bank was hit by heavy losses. IKB collapsed in July 2007 when a department that bought subprime mortgages ran out of funds. Four IKB managers were since ousted, included CEO Stefan Ortseifen.
In March, German stock market operator Deutsche Boerse suspended trading in IKB shares after the bank revealed that it did not expect to post a significant profit for the foreseeable future.
The decision came after an auction of most of IKB's 3 billion euro portfolio of risky securities had been suspended due to a lack of satisfactory bids.
In April, IKB was also subject to investigation for possible insider trading.