Bloomberg (Dec. 13, 2011)
By Karin Matussek & Aaron Kirchfeld

Commerzbank AG’s Eurohypo must pay interest to holders of profit certificates, a German appeals court ruled in a case brought by private-equity firm Crown Ocean Capital Ltd. (OCE).

The Frankfurt Higher Regional Court today overturned a lower court ruling from last year that Eurohypo, Commerzbank’s real estate arm, could stop payments for 2009 after recording a loss. The certificates were originally issued by Rheinhyp AG, which later became part of Eurohypo.

QVT Financial LP, a New York hedge fund, won a ruling in Frankfurt earlier this year over the issue in a separate suit. QVT has also sued in Delaware, claiming Eurohypo owes $68 million for profit-dependant payments on hybrid capital investments. Commerzbank is trying to raise 5.3 billion euros ($7 billion) in capital by mid-2012.

Commerzbank, which agreed to buy Eurohypo in 2005, will analyze the ruling and may appeal, company spokesman Maximilian Bicker said in an e-mailed statement. Eurohypo can appeal the decision to Germany’s top civil court.

„The ruling for the first time clarifies an important legal issue: how do you have to indemnify profit certificate investors in a takeover,“ said Klaus Steiner, Crown Ocean’s lawyer. „The court reasoned that you have to grant them protection similar to shareholders in that situation under German law.“

Profit certificates are securities that entitle the holder to a portion of a company’s profits while obliging them to share in losses without giving them any ownership of the business.

Today’s case is OLG Frankfurt am Main, 5 U 56/11.


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