Senior debt holders and depositors face losses on ailing Danish bank

Danish bank Amagerbanken has announced that it can no longer meet its solvency requirements and is to transfer its assets to the state-owned Financial Stability Company. More notably, senior debt holders and some depositors both face losses, according to research from CreditSights. 

The Danish bank guarantee scheme previously protected senior debt holders and depositors from any losses, but expired on 30 September 2010, meaning that senior liabilities, including deposits over €100,000 Danish deposit insurance limit, are no longer covered.

Holders of senior debt and deposits over €100,000 can expect a haircut of around 41%, say CreditSights.

As of 30 September 2010, Amagerbanken had assets of DKK33.3 billion (€4.5 billion), loans of DKK21.1 billion (€2.8 billion), and equity of DKK2.4 billion (€300 million).

The Copenhagen Post reports that the bank filed for bankruptcy on Sunday, having flirted with bankruptcy several times over the last two and half years, only to be bailed out by investors each time, with billionaire Karsten Ree reported to have pumped DKK800 million into the bank.