EUROPE NEWS: Flowers fights on

It is already being looked upon as a disastrous deal, but at least Christopher Flowers is fighting his corner.

The private equity firm he founded, JC Flowers, joined with Grove International Partners and Japan's Shinsei Bank to make a €1.1 billion investment for a 24 percent stake in German lender Hypo Real Estate in 2007.

Since then the investors' equity has been substantially wiped out and the German government wants to nationalise the bank.


But last month, Flowers insisted his firm wanted to remain a shareholder in the troubled lender. Appearing in front of a German parliamentary committee, he reportedly told politicians that by remaining a key investor, JC Flowers would help save taxpayers money.

“We would remain as shareholders of the company and our fortunes would – either good or bad – ride with the German state from that point forward,” Flowers said, according to a Reuters report.

“We have not been asked whether we would be interested in contributing further capital to Hypo Real Estate. But let me state that that is something we would consider if we were invited.”

Flowers has been battling to retain his firm's stake after Germany's coalition government backed plans to seize control of the bank as a last resort. Lawmakers were expected, at the time of going to press, to pass a bill that would allow Germany's first bank nationalisation since the 1930s, Bloomberg reported.

Germany has already made available €102 billion in loans and guarantees to ensure Hypo's survival.

Flowers told the parliamentary committee that Hypo could not have survived without government assistance. “The government and the people have done the bank a good service. Steps taken were very necessary and appropriate though not unique, being taken by other states around the world,” he said.

However, Flowers warned attempts to seize the bank would be an “extreme step”, one that would be seen by investors as “unusual even in these circumstances”. The JC Flowers consortium offered €22.50 a share for the stake, but those shares have sunk to less than €1, as of press time.

Hypo is no longer writing new business, and it has closed some European offices as part of a streamlining process, according to those familiar with the situation, so the prospect of shares rebounding quickly on the back of a resumption of normal activity seems a long way off.

In the meantime, Flowers and the co-investors will be fighting to preserve value as best they can.