Reuters: Bankruptcy News: Dutch sludge firm in derivatives talks with Deutsche

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Dutch sludge firm in derivatives talks with Deutsche Jul 12th 2012, 17:17 AMSTERDAM, July 12 | Thu Jul 12, 2012 1:17pm EDT AMSTERDAM, July 12 (Reuters) - A Dutch sludge-processing firm said it was in talks with Deutsche Bank and others about a 270 million euro ($331 million) derivatives deal, in which it effectively guaranteed loans the German bank made to other firms. Slibverwerking Noord-Brabant (SNB), owned by Dutch public water management bodies, is now sitting on a loss on the deal which it agreed in 2007, before the global credit crisis. SNB is talking to Deutsche Bank, its shareholders and other stakeholders about changing the terms of the loan guarantees, Chief Financial Officer Silvester Bombeeck told Reuters. The current terms are that it will pay up to 270 million euros to Deutsche Bank if there are bankruptcies in a loan portfolio of about 115 companies. Due to a change in Dutch accounting rules, SNB will also be forced to take a charge for the negative market value for the current book year, which would push SNB's solvency below 75 percent giving Deutsche Bank the right to dissolve the deal, Bombeeck said. The negotiations centre on a different agreement on the solvency requirement or calculation, Bombeeck said. "If such a claim existed and if Deutsche Bank would demand the claim (close the contract), it would mean the bankruptcy of SNB," Bombeeck said, adding that he did not expect this to happen. "It would be very strange that you'd go bankrupt due to accountancy rules. If you look at the underlying risk of the transaction then we have a positive view. We expect, when the transaction matures in 2017, to have no risks," Bombeeck said. SNB is the second Dutch name to be hit by derivative problems in the space of a few months. Dutch housing corporation Vestia recently reached an agreement with its banks after it took a hit on derivatives contracts and had to be rescued by the government. A spokesman for Deutsche Bank in the Netherlands said that the bank never comments on confidential client matters. ($1 = 0.8164 euros) (Reporting by Gilbert Kreijger; Editing by Sara Webb and Elaine Hardcastle) Link this Share this Digg this Email Reprints

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