HSH N Funding II rules out 2009 Sphere securities coupon payment

By Caroline Salls

Pittsburgh, Dec. 18 - HSH N Funding II said the EU Commission has informed HSH Nordbank AG that it will not retract its requirements for servicing and participating in losses on hybrid capital instruments, leaving HSH Nordbank unable to make any payouts on profit participation capital and silent partnerships in the event of a net loss or balance sheet loss for fiscal year 2009, according to a news release.

For the $500 million of HSH Nordbank Sphere Securities issued on a fiduciary basis by Banque de Luxembourg, HSH N Funding said this means that no coupon payment will be made for the profit period 2009 and that these instruments will participate in a balance sheet loss for the fiscal year 2009.

The company said the precise amount of the loss participation will not be determined until the 2009 financial statements of the bank are approved.

In addition, HSH said capital instruments would have to participate in either the balance sheet loss or net loss for the fiscal year 2009.

According to the release, the Banque de Luxembourg has acquired 500,000 class B preference shares issued by HSH N Funding II with the proceeds of the issue of the Sphere Securities.

With the proceeds of the class B securities issuance, the company acquired a silent participation in the commercial enterprise of HSH Nordbank AG in the form of a Stille Gesellschaft under German law.

HSH Nordbank is a Hamburg, Germany-based bank.

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