Commerzbank to take charge in results for Detroit debt

Reuters News
Posted: Jul 24, 2013 1:54 PM

FRANKFURT (Reuters) - German bank Commerzbank has taken an unspecified impairment charge in its financial results on lending to the U.S. city of Detroit, it said on Wednesday, but declined to say when it booked the writedown.

The Michigan city filed for bankruptcy protection last week in the largest ever such U.S. case. If approved by a federal judge it would force Detroit's thousands of creditors into negotiations with the city's emergency manager over an estimated $18.5 billion in debt.

"We are exposed in Detroit through our subsidiaries and have taken an impairment, which is appropriate from the present point of view," a spokesman for the bank said.

Commerzbank is due to publish its second-quarter results on August 8.

Two financial sources told Reuters that Hypothekenbank Frankfurt, a Commerzbank unit formerly known as Eurohypo, had made loans of around $400 million to the U.S. city.

German daily Frankfurter Allgemeine Zeitung, in a release on Wednesday of a report to be published on Thursday, said Commerzbank had already taken a charge of an unspecified amount in its results in previous years.

But the rest of the amount would hit this year's second-quarter results, the report said, which did not name its sources.

Commerzbank is the second bank in Germany to have declared an exposure to Detroit.

FMS Wertmanagement, the "bad bank" unit of Hypo Real Estate, holds more than $200 million bonds issued by Detroit and has already written down part of its debt holdings.

Meanwhile the nationalized Franco-Belgian bank Dexia said on Monday it would take a 50 million-euro ($66 million) charge in its second-quarter results related Detroit.

(Reporting by Alexander Huebner; Writing by Marilyn Gerlach; Editing by Greg Mahlich)