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Tuesday, 26 March, 2002, 22:35 GMT
Hopes rise for Holzmann workers
Holzmann workers demonstrate in Frankfurt
Holzmann workers: Future looks slightly brighter
Hopes have risen for workers at construction firm Philipp Holzmann, after banks owed money by the stricken German giant offered further credit.

The creditor banks have agreed to provide "a sum in the high-two figure millions" of euros, Ottmar Hermann, Holzmann's administrator, said.

The offer "gives us hope to continue leading Philipp Holzmann and of holding on to as many jobs as possible", Mr Hermann added.

The firm, which employs 23,000 people, last week filed for insolvency in Germany's largest ever corporate failure, after talks with creditors to agree a rescue plan broke down.

Future options

Mr Hermann has three months to determine whether Philipp Holzmann is to be revived, sold off in parts, or liquidated.

"The granting of the credit averts the threat of an uncontrolled break-up of the company for the time being," Mr Hermann said.

While many parts of the company have a troubled history, arms including building systems business HSG Holzmann Technischer Service, are seen as potential takeover targets.

An executive of industrial group ThyssenKrupp said in an interview with Focus Money magazine that the division was "a takeover candidate for us".

Philipp Holzmann's collapse came three years after the firm was rescued by a bailout led by German Chancellor Gerhard Shroeder.

The company last year lost 237m euros.

Troubled German construction firm Philipp Holzmann has filed for insolvency after failing to clinch a rescue plan with its creditors.

The decision comes just two and a half years after being saved by a high-profile bail-out orchestrated by Chancellor Gerhard Schroeder.

Talks between the firm's 17 creditor banks broke down during the afternoon, leaving no other option but to file for insolvency.

Holzmann employs 23,000 people and has now become one of Germany's biggest ever corporate failures.

Holzmann's decision to file for insolvency is a blow for the Chancellor and his coalition government just months before a general election where the economy and employment are set to be centre stage.

Rescue plan

A weak domestic construction market and a loss-making property portfolio have weighed heavily on Holzmann's balance sheet.

The Frankfurter Welle building
Holzmann was behind some of Germany's best-known buildings

A rescue plan was drawn up by Deutsche Bank, the firm's largest shareholder, but its creditors rejected it as not providing a viable basis for the firm to keep operating.

Deutsche Bank's plan focused on selling the firm's profitable HSG technical services unit, the waiving of 200m euros (124m; $177m) in debt and transferring the property portfolio to creditor banks for about 500m euros.

Holzmann has crippling debts of 1.6bn euros, weighed down by the poorly performing property assets.

The steep downturn in the German construction market last year has brought it estimated losses of 240m euros, triple the amount for the year before.

Some of its problems stem from heavy investments in building in eastern Germany after reunification, which never paid off.

No more aid

Chancellor Schroeder recently said he was confident the 17 creditor banks would agree a solution safeguarding the company's future although officials have said there will be no more state aid.

Holzmann shares, which have been under severe pressure in recent days, were suspended before the announcement that the talks had failed.

The shares plunged 42% to 2.86 euros after trading resumed before being suspended again pending the announcement of insolvency.

See also:

21 Mar 02 | Business
Holzmann files for insolvency
06 Mar 02 | Business
German jobless total holds steady
27 Feb 02 | Business
German recession confirmed
06 Feb 02 | Europe
Jobless put Schroeder on the line
17 Jan 02 | Business
Germany on brink of recession
27 Nov 01 | Business
Germany 'is already in recession'
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