WestImmo faces liquidation as sale to Apollo is halted

International real estate lender WestImmo faces possible liquidation after its parent bank, WestLB, pulled the plug on a potential sale of the unit to New York-based private equity group Apollo.

Citing deteriorating market conditions in the financial sector, the German banking group said Apollo's offer was not acceptable. WestImmo may now be liquidated in WestLB's bad bank structure.

WestLB had been in discussions with Apollo for months, with the potential sale focusing on WestImmo's Pfandbrief (mortgage bond) business.

'In recent months the already challenging market situation deteriorated again considerably,' WestLB said. 'A sale of our subsidiary entails major potential risks in the current market environment and under the prevailing conditions cannot be justified in economic terms.'

WestLB said the recent economic turmoil hampers the business prospects of a Pfandbrief bank and increases the risks for the banking group and its owners. In addition, the latest purchase price offer is not acceptable, it added.

'It was our declared aim to bring the sale negotiations to a conclusion, also with a view to preserving jobs. However, the further deterioration in the market environment and the economic valuation leave us no choice. The transaction and above all extended liability risks would be untenable for the bank and its owners,' said Dietrich Voigtländer, chairman of the WestLB managing board.

The sale of WestImmo hit a stumbling block in October after German banking association BdB reportedly refused to allow Westimmo into its deposit insurance fund. The refusal represented a major hurdle in WestLB's quest to sell the unit to Apollo, as it meant Westimmo could have trouble raising funds on the capital markets.

The European Commission originally set a mid-February deadline for WestLB to divest WestImmo in exchange for public sector subsidies during the global financial crisis. This date has repeatedly been extended and is now slated for mid-2012.