AMSTERDAM, Feb 5 (Reuters) - Subordinated bondholders in SNS Reaal plan to challenge the nationalisation of the Dutch banking and insurance group, angered - like shareholders - by a move that will wipe out their investments.
The 10-billion-euro ($13.6 billion) rescue on Friday of the Netherlands’ fourth-largest financial services group, has infuriated taxpayers, shareholders and some bondholders who are partly footing the bill.
The government said the rescue package, which follows a much smaller bailout in 2008, was necessary to prevent SNS Reaal’s collapse under the weight of property loan losses and to shore up confidence in the financial system after a private investor-led rescue failed.
The Netherlands used a new law known as the intervention act to expropriate SNS Reaal’s shares, subordinated debt and some hybrid securities, but not the senior debt and covered bonds.
Frans Faas, an activist investor, has set up a foundation to represent the interests of subordinated debt holders - whose securities had a total face value of about 1.8 billion euros - and to challenge the decision to nationalise SNS Reaal.
He said other investors had joined the campaign but declined to say how many or to provide names.
Faas told Reuters he would appeal to the Council of State, the body which advises the government and parliament on legislation and issues of governance, and questioned whether another solution could have been found for SNS Reaal that would not have wiped out shareholders and some debt holders.
“Shareholders and bond holders were not properly informed about the situation at SNS Reaal,” he said.
“We were not given an opportunity to consider an alternative to nationalisation. They (SNS Reaal) could have done a rights issue or postponed interest payments instead.”
The Dutch Association of Shareholders, or VEB, has also said it plans to challenge the nationalisation.
Faas questioned the size of the property losses cited by the government in its decision to nationalise, which were larger than previous estimates given by the company, and criticised finance minister Jeroen Dijsselbloem’s decision to make some bond holders and the Dutch banks share the cost of the rescue, saying he was playing to public opinion.
There is little public enthusiasm for another expensive bailout at a time of tight public finances and several rounds of austerity measures.
The government paid out nearly 40 billion euros to rescue the domestic financial sector in 2008 when it provided capital injections for ING, Aegon and SNS Reaal, as well as nationalising ABN AMRO.
Dijsselbloem said on Sunday he would look at whether those responsible for the mismanagement of SNS Reaal could be held accountable.
Last month, SNS Reaal said former clients of its property finance arm were being investigated by the country’s tax and financial crimes agency, but gave no details.
The finance minister on Friday put the initial cost of nationalisation at 3.7 billion euros, saying SNS Reaal would receive a capital injection of 2.2 billion euros, and a further 1.5 billion euros to write down state aid and property assets.
The state is providing 1.1 billion euros in loans, and 5 billion euros in guarantees. But in an effort to share the burden with the private sector, Dutch banks will have to contribute 1 billion euros to the rescue in 2014.
$1 = 0.7376 euros Editing by Mark Potter