Christopher Flowers, the founder of JC Flowers, and Richard Mully, a managing partner of private equity real estate firm Grove International Partners, have relinquished their positions from the supervisory board of troubled Germany-based commercial property lender Hypo Real Estate.
The decision comes as the German government prepares to nationalise the bank after propping it up last year with tens of billions of euros.
JC Flowers, Grove International Partners and Japan's Shinsei bank invested €1 billion in Hypo in return for a near 24 percent stake in 2007 and have been fighting recently to preserve the value of their investment.
In a statement, JC Flowers said it had taken the decision to step down from the supervisory board in order to avoid conflicts of interest.
“We regret very much that at such an important time for [Hypo] we have had to resign from the supervisory board. We and our investors had always viewed our involvement as a medium- to long-term investment that would provide both capital and deep experience in restructuring the bank. We remain committed to this view,” said Flowers.
The firm also reiterated its desire to remain as a shareholder in the company rather than give up its stake, whose value has been decimated following a massive fall in Hypo's share price. Shares in Hypo current trade for as little as €1.16 whereas the investing consortium paid €22.50 for each share in 2007.
JC Flowers based in New York specialises in financial services investments, and has been scaling back its presence in Germany with a skeleton staff remaining in its Hamburg office. Its German chief, Renate Krümmer, has departed the firm to pursue other interests two years after joining. Going forward the firm will have no full-time operational presence in the country, shifting all its activity to its existing London and New York offices. Krümmer is also relinquishing her seat on Hypo’s board.
Flowers’ other significant German investment is a 25.6 percent stake in German Landesbank HSH Nordbank, for which it paid €1.25 billion in 2006. HSH has since required further capital injections from Flowers and its other shareholders, and is currently in talks to secure further funding from SoFFin, the German government’s bank rescue fund. Yet it has attracted most attention over its stake in Hypo. Yesterday, the bank was able to deliver some good news. It said a €20 billion Federal German Government Guarantee provided as part of a €50 billion rescue package last November, had been extended until 31 December this year.