Hanover Syndicating Credit for Swedish Bank
LONDON -- The British unit of Manufacturers Hanover Trust is attempting to syndicate a $62.5 million credit for Gota Bank, Sweden's fourth-largest private commercial bank.
Denominated in German marks, the four-year loan is designed to overcome investors' concern about the weakness of Scandinavian banks.
The floating interest rate is 35 basis points over the benchmark Libor rate for marks for the first two years. This rises to 40 basis points from then on.
Under an extra pricing formula, the margin can then be increased or decreased by up to five basis points if Gota Bank's rating changes during the four-year term.
Inducement Called Necessary
"We feel it's only fair to lenders in these times when the asset quality of Nordic banks and the economic situation in the region have been deteriorating," said Anders Kvist, the executive vice president who heads the treasury division at Gota Bank, which has $17 billion of assets.
Without the pricing inducement, the "gut reaction" of many banks could have been, "we don't want to touch the Nordic region at this time," the Swedish banker said.
Much of Scandinavian banking is under severe pressure, as ballooning real estate and corporate loan writeoffs mire it in major losses in what some analysts assert is tantamount to a regional banking crisis.
"There are problems of a similar nature across the region," said Torstein Jorstad, Nordic banking analyst at Standard & Poor's Corp.
Big Bank Technically Insolvent
Banks in Norway and Finland in particular have been struggling. In the biggest casualty of these bruising conditions so far, Norway's second largest bank, Christiania Bank og Kreditkasse, announced last month that its private share capital was worthless, technically leaving it insolvent.
The stock of Norway's leading bank, Den Norske Bank, plunged nearly 50% Wednesday amid claims in Oslo that its equity capital could be wiped out by the end of the year.