JC Flowers accused of being ‘uncooperative’ over Hypo

The private equity firm is reportedly at odds with the German government over how to rescue the stricken commercial real estate lender. JC Flowers and Grove International invested €1.1bn for a 24% stake in the bank in June.

The German government has reportedly accused JC Flowers of being “uncooperative” over a potential rescue plan for the embattled commercial real estate lender, Hypo Real Estate.

According to a report in the Financial Times, JC Flowers has proved reluctant for Berlin to take a 75 percent stake of Hypo in a bid to inject capital and liquidity into the struggling bank.

JC Flowers and Grove International, working with Japanese financial institution, Shinsei Bank Limited, invested €1.1 billion in Hypo in June 2008 for up to 24.13 percent of the firm’s shares. Since that time, Hypo’s shares have plummeted more than 90 percent.

The report said that the German government needed approval from JC Flowers and Grove because the 24 percent stake could be a blocking minority at any shareholders’ meeting. The report added that investment funds sympathetic to JC Flowers could also create obstacles to the part-nationalisation.

JC Flowers and Grove International were unavailable for comment at press time.

However, the report quoted a person close to JC Flowers as dismissing the charges. The source called on Berlin to present “its entire plan” and added: “JC Flowers always wanted to be a co-operative investor. The firm wants to stabilise HRE. But it can only talk to Berlin when Berlin knows what it wants.”

To date, Hypo Real Estate has received €42 billion in guarantees from the German government bailout plan.