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From Staff Reports
Germany's Landesbank Baden-Wuerttemberg will take over SachsenLB, the smaller public-sector German bank that helped the subprime LBBW will pay $342 million as an initial measure, said Guenther Oettinger, the governor of Baden-Wuerttemberg. He said SachsenLB's owners would transfer their holdings to LBBW. SachsenLB will be part of the state-run bank in early 2008.
“We see our responsibility to solve the problem," Oettinger said, after having earlier estimated SachsenLB's value at between $410 million and $1.1 billion.
News of Leipzig-based SachsenLB's troubles a week ago when it said it received a $23.7 billion credit line from other banks, to help it overcome risk from the subprime exposure of an Irish-based unit. The daily, Die Welt reported last week that a new liquidity gap totaling $547 million had been uncovered. The bank has declined to comment on that report, which came before weekend talks on SachsenLB's future. A source who requested anonymity, due to the sensitive negotiations, said German finance-sector regulator, BaFin, said it would shutter Sachsen down if no sales agreement was reached Sunday. On Thursday, bank executive, Stefan Leusder, who oversaw capital markets operations, said he would resign. Both the bank and its state owners accepted his resignation.
Sachsen-Finanzgruppe, which represents local savings banks and municipal authorities, holds about 63% of SachsenLB, with the eastern state of Saxony holding the rest. Saxony Governor Georg Milbradt said he believed that, with the backing of the Baden-Wuerttemberg (bank), this matter will be resolved. Normal business will resume Monday.
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