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£930 million Volkswagen bet loser refused lifeline by RBS
Simon English and Allan Hall19.12.08
Royal Bank of Scotland is refusing to extend a bridging loan of £375 million to German billionaire Adolf Merckle, further threatening his business empire.
Merckle has been fighting with banks for weeks after losing up to 1 billion euros (£930 million) betting that Volkswagen shares would decline. They rose sharply, leaving his VEM investment arm in serious trouble and jeopardising loans made by about 40 lenders, including RBS, which is 57% owned by the UK Government.
How much RBS could stand to lose if VEM goes under is not clear. The bank declined to comment.
Threats from Merckle that he could push the business into insolvency have so far been regarded as posturing tactics to secure temporary loans. He faces a liquidity shortage and could be forced to liquidate some family holdings.
With Germany's Commerzbank and regional lender Baden-Württemberg Landesbank, RBS has the biggest exposure to Merckle's engineering, pharmaceuticals and textiles empire.
His linen business lost half its capital value last week because of threatened writedowns on fixed assets. His drugs-distribution company Phoenix reportedly needs 400 million euros after the Merckle family used money from the wholesaler's operating business to plug losses at VEM.
Merckle, 74, also controls drugs group Ratiopharm, and HeidelbergCement. He is said to be a modest man who lives quietly in a southern German village. His only luxury is to go on expeditions to the Andes or Himalayas. A year ago, Forbes Magazine put his fortune at about $9 billion (£6 billion).
Merckle inherited a small pharmaceuticals company from his father in the late 1960s. He gradually built an empire with sales of 35 billion euros and more than 100,000 workers. Former Ratiopharm director Heinrich Zinken told Manager Magazin that Merckle was "greedy, envious and held grudges".
Reader views (2)
He may lead a 'simple life' but greed transcends everything. His 'one way' bet that VW shares would fall allowing him to make millions was one of pure greed and nothing else. He gave no thought to the consequences on the employment prospects of VW workers had his money making scheme paid off. He should be allowed to go personally bankrupt, he will then have no choice but to lead the simple life he so desires.
- Pete, Banstead. Uk
Merckle may feel that Porche's secret dealings are responsible for this particular nightmare. The fact is, with his empire which includes Hanson who were taken over by Heidelberg Cement, he had absolutely no need to get involved. His motivation could only have been pure greed.
- Harry H, London UK
