The German state will still hold 25 percent plus one share of the bank following what
ING analysts said it was essentially a debt-for-equity swap involving about 118 million shares in all.
The exact amount of the increase is to be fixed on 21 January by the bank’s management and supervisory boards, a statement said, and “will result in an increase of Core Tier 1 capital.”
That is a key measure of a bank’s ability to withstand losses that is to be subjected to tighter definitions under so-called Basel III bank accounting rules.
A banking source told news agency AFP there was strong interest in the deal, and forecast a share price range of €5.25-5.35, which would give Commerzbank an additional €620 million – €632 million ($812 million – $828 million).
Commerzbank shares plunged by 2.82 percent to €5.48 in midday trading while Frankfurt’s DAX index of leading German stocks was 0.17 percent lower overall.
The bank said it had reached agreement with Credit Suisse on the transformation of hybrid instruments as a key part of the deal.
Credit Suisse is to acquire instruments known as Trust Preferred Securities from investors and “contribute them as a contribution in kind to Commerzbank in exchange for new shares,” the statement said.
The capital increase would reach a maximum of 10 percent minus one share, it added.
“The German Financial Market Sabilisation Fund (SoFFin) intends to continue to maintain its equity interest ratio in Commerzbank (25 percent plus one share) upon completion of the transaction,” the bank said.
That would take place by converting part of SoFFin’s silent participation, worth €16.4 billion, in Commerzbank’s equity into common shares.
ING analysts called the operation “an interesting measure to optimize its capital structure.”
But they also noted that “the amounts involved are limited compared to the total sums due to SoFFin and do not change our fundamental negative credit opinion on the group.”