Holzmann files for insolvency

March 21, 2002 Posted: 12:11 PM EST

German construction giant collapsed after rescue plan failed to please creditors

FRANKFURT, Germany - Construction giant Philipp Holzmann said on Thursday it was filing for insolvency after failing to reach agreement on a rescue package with its creditor banks.

The collapse, the biggest in German post-war history, comes after weeks of intense negotiations with creditors to save the 150-year-old company.

It also comes two and a half years after Chancellor Gerhard Schroeder personally intervened to orchestrate a 2.2-billion euro bailout of the company.

The German government, under pressure from the European Union to keep its budget deficit within limits imposed by economic and monetary union, ruled out similar action this time around.

The company, which employs 24,000 people worldwide, had been facing mounting debt due to stiff competition in the construction sector and a slowdown in the global economy.

Holzmann said three of Germany's biggest banks on Wednesday rejected a proposal put forward by Deutsche Bank, which has a 19.6 percent stake in Holzmann and is its largest creditor.

Johannes Ohlinger, Holzmann's chief financial officer, on Thursday said Deutsche Bank had offered 50 million euros ($44 million) in additional funding in a last-ditch effort to keep the company afloat. He also confirmed Holzmann had a net loss of 237 million euros in 2001.

Deutsche Bank (FDBK) is said to already have an exposure of 300 million euros, while Bayerische Landesbank has more than 200 million euros, and Commerzbank (FCBK) and HVB Group (FHVM) around 140 million euros each. Dresdner Bank has an exposure of about 100 million euros.

Commerzbank, HVB and Dresdner were the banks that rejected the rescue package.

Holzmann's shares were down 21 percent to 3.95 euros in Frankfurt on Thursday. Trading in the company's stock had been suspended twice during the session as it issued statements on its financial situation.

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