Giessen wants to sell receivables to financial investors

2023-12-22 15:02:16

The city of Giessen wants to sell its claims from the Greensill bank’s insolvency proceedings to financial investors. The majority of city councilors passed the fundamental decision on this in a non-public meeting on Thursday evening. The magistrate had previously spoken out in favor of this procedure. Gießen follows the example of the Erzgebirgskreis, the Verbandsgemeinde of Diez and the city of Pirmasens. City treasurer Alexander Wright (The Greens) hopes that the sale will be able to draw a line under the investment affair, in which ten million euros are at stake for Gießen. The city had invested this sum in Greensill. As a result of the bankruptcy, investment guidelines have now been tightened.

Thorsten Winter

Correspondent for the Rhein-Main-Zeitung for Central Hesse and the Wetterau.

At the time, the private bank offered a few tenths of a percentage point in interest and therefore more money than other credit institutions. Because of the European Central Bank’s low interest rate policy at the time, Giessen, like other municipalities, even had to pay penalty interest on bank deposits – investments with Greensill therefore appeared to be a way out for Central Hesse.

Because of a few tenths of interest

In March 2021, the city received news of the bank’s insolvency. Since then, like Eschborn and Wiesbaden, they have been worried about their deposits. All in all, Hessian municipalities have invested around 82 million euros with Greensill.

The case is also very painful for Giessen because in recent years the city has regularly not been one of the financially well-equipped municipalities. It was only in 2020 that she left the country’s protective shield procedure after seven years.

In 2012, the then mayor and city treasurer Dietlind Grabe-Bolz (SPD) presented a budget with a deficit of 32 million euros; the municipality entered the protective shield agreement with a deficit of 26 million euros. In the agreement with the state, the city agreed to reduce the deficit, in return Hesse took 78 million euros in debt from it, plus help for interest payments and millions from the state equalization fund, from which the state supports financially weak municipalities.

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With Thursday’s city council decision behind it, the magistrate can now advertise for offers from financial investors. As Wright explained after the magistrate’s move in November, the incalculable length of the insolvency proceedings and the uncertain outcome speak in favor of selling the claims to specialized private equity companies. The risk of legal costs in claims for damages against third parties should also be taken into account, it goes on to say.

As a spokeswoman said, the city plans to initiate the bidding process in the course of the new year. She already “knows of some prospective buyers”. The city reserves the right to approach potential buyers of the claims itself. The bidding process will therefore take place under certain conditions. That means: The city is hoping for a certain quota from the ten million euros. However, she keeps to herself how much money she wants to raise. The duration of the procedure cannot be estimated. So far the city has not received any offers and has not negotiated.

No more investments in commercial banks

In order to avoid a loss like Greensill’s in the future, the city will no longer deposit money into private and commercial banks. In fact, it can only invest its excess capital with Volks- and Raiffeisenbanken as well as savings banks if the Bundesbank does not offer it enough interest. Gießen is not alone with his new line, but is following Frankfurt’s example. In the recent past, the banking metropolis has preferred to invest money in savings banks and cooperative institutions.

Regardless, the affair continues to drag on at the top of the city. A few days ago, during a meeting with media representatives, the board of the Gießen-based Volksbank Mittelhessen mockingly recalled the millions in the fire.